UDG Healthcare PLC. Proposed Sale of United Drug Supply Chain Businesses and MASTA to McKesson Corporation. Leadership Transition Announced

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1 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART) IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION FOR IMMEDIATE RELEASE 18 September 2015 UDG Healthcare PLC Proposed Sale of United Drug Supply Chain Businesses and MASTA to McKesson Corporation Leadership Transition Announced Key highlights UDG Healthcare PLC, a leading international healthcare services provider, announces that it has entered into a conditional agreement for the sale of certain assets, including: - United Drug Supply Chain Services businesses 1 that form part of UDG Healthcare's Supply Chain Services Division; and - MASTA Business, which forms part of the Ashfield Commercial & Medical Services Division, to McKesson, for an aggregate cash consideration of million on a cash and debt free basis. The Disposal is consistent with Group strategy to focus on its higher growth, higher margin international healthcare services businesses and progresses the Group s transformation to a more focused international healthcare services business The Disposed Businesses will be better positioned to prosper under the ownership of McKesson, a leading international wholesale and retail group The Continuing Group is extremely well positioned to develop and strengthen existing market positions in Ashfield, Aquilant and Sharp, and capitalise on the increasing demand for their services The net proceeds from the Disposal will facilitate increased investment in higher growth areas both organically and via acquisition. A portion of the net proceeds will be used to repay part of the Group's outstanding debt Leadership Transition as CEO, Liam FitzGerald, announces plans to retire in March 2016 and Board nominates COO, Brendan McAtamney, as his successor. 1 United Drug Supply Chain Services businesses comprises the wholesale and pre-wholesale businesses in the Republic of Ireland, the United Drug Sangers business in Northern Ireland and the TCP Group in the Republic of Ireland. The United Drug Supply Chain Services businesses to be disposed of do not include the Aquilant Business. 1

2 Commenting on the Disposal, Peter Gray, Chairman of UDG Healthcare said: Today s announcement is the culmination of 15 years of strategic development by the Group. It gives us the resources to continue building our higher margin, higher growth divisions, while placing our legacy United Drug Supply Chain Services business in the ownership of a global leader who will bring new opportunities and strengths to that business, its staff and its customers, to whom we extend our thanks for their long standing loyalty. The Disposal constitutes a Class 1 transaction for the purpose of the Listing Rules and is conditional upon, inter alia, the approval of Shareholders at an Extraordinary General Meeting and, the approval from the applicable regulatory authorities. The transaction is anticipated to complete by 31 March A circular containing further details of the Disposal, including the notice of the Extraordinary General Meeting to seek Shareholders' approval for the Disposal, is expected to be sent to Shareholders shortly. The General Meeting is to be held at 12 noon on 13 October 2015 at The Clyde Court Hotel, Lansdowne Road, Ballsbridge, Dublin 4, Ireland. CEO Transition Following the negotiation of this transaction, Liam FitzGerald, the Group Chief Executive Officer since 2000, has informed the Board that he plans to retire on March after 23 years with Company. Having been aware over the last number of years of Mr. FitzGerald s early retirement aspirations, the Board has been actively involved in succession planning and has nominated Brendan McAtamney, Group Chief Operating Officer since 2013, as his successor. It has been my privilege to lead this company for 15 exciting years, said Mr FitzGerald, and I believe now is the right time for new leadership to take the Company forward. Since 2000 we have been on a journey to transform the Group and move into new higher-growth outsourced pharmaceutical service areas and geographies. Today s announcement marks the completion of that transformation, albeit subject to shareholder approval. It s a good time to pass the baton to Brendan, and to move to a different phase in my career. The Board has asked Mr FitzGerald, and he has agreed, after 31 March 2016 to remain as a consultant and a director until 30 September 2016 to support the transition, and to continue to provide his experience to the Company as it invests further in its key services. Liam has achieved what very few CEOs have successfully done, and transitioned the Company over a long period and through difficult times from its original core business into new and growing service areas and geographies, said Chairman, Peter Gray. He has been very transparent with the Board regarding his aspirations, and has ensured we have a strong succession plan in place. Brendan McAtamney, who joined us in 2013 with broad pharmaceutical and international market experience, has been a great addition to the team, and we are delighted to have him ready to step forward for a seamless transition. Investors and Analysts A conference call for investors and analysts will take place today at am B.S.T. The dial-in details are as follows: Standard International Access: +44 (0) UK Toll Free: Ireland: +353 (0) Password: UDG Healthcare 2

3 You can view the accompanying presentation slides for the call at the following link: Participant pin: # The presentation will also be available for download at A playback facility will be available on +44 (0) (UK or International) or (0) (Ireland). The access code for the replay will be # For further information, please contact: Investors and Analysts: Alan Ralph CFO UDG Healthcare plc Tel: David Marshall Head of Investor Relations UDG Healthcare plc Tel: Goldman Sachs International (Financial adviser and sponsor) Ben Thorpe Chris Emmerson Tel: +44 (0) Jefferies (UK Corporate Broker) Simon Hardy Henry Elphick Tel: +44 (0) Media: Business / Financial media: Rory Godson / Lisa Kavanagh / Jack Hickey Powerscourt Tel: Trade Media (UK and Ireland): Mary Clark, Supriya Mathur, Hollie Vile Hume Brophy Tel: udg@humebrophy.com Goldman Sachs, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting exclusively for UDG Healthcare plc and for no one else in relation to the Disposal and will not be responsible to anyone other than UDG Healthcare plc for providing the protections afforded to its clients or for providing advice in relation to the Disposal or any other matters referred to or described in this announcement. Jefferies International Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for UDG Healthcare plc and for no one else in relation to the Disposal and will not be responsible to anyone other than UDG Healthcare plc for providing the protections afforded to its clients or for providing advice in relation to the Disposal or any other matters referred to or described in this announcement. 3

4 Forward looking statements This announcement contains certain forward-looking statements, beliefs or opinions, including statements with respect to the Group s or the Continuing Group s business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, plans, anticipates, targets, aims, continues, expects, intends, hopes, may, will, would, could or should or, in each case, their negative or other various or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These statements are made in good faith based on the information available to the Company at the date of this announcement and reflect the Directors beliefs and expectations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in regulation and government policies, spending and procurement methodologies, currency fluctuations, the complexity of separating significant business systems and support services and certain reorganisation steps as a consequence of the Disposal, potential customer, supplier and employee reaction to the Disposal, the reduction in scale of the Continuing Group's business following the Disposal and other factors discussed in Part 2 (Risk Factors) of the circular to be distributed to Shareholders. No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement speak only as of their respective dates, reflect the Directors current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group s or the Continuing Group s operations and growth strategy. You should specifically consider the factors identified in this announcement which could cause actual results to differ before making any decision in relation to the Disposal. Subject to the requirements of the FCA, the London Stock Exchange, the Listing Rules and the Disclosure and Transparency Rules (and/or any regulatory requirements) or applicable law, the Company explicitly disclaims any obligation or undertaking publicly to release the result of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Company s expectations or to reflect events or circumstances after the date of this announcement. About UDG Healthcare plc: Listed on the London Stock Exchange, UDG Healthcare plc is a leading international provider of services to healthcare manufacturers and pharmacies, with operations in 20 countries including the US, UK, Ireland and Germany. UDG Healthcare plc operates across three divisions: Ashfield Commercial & Medical Services, Sharp Packaging Services and Supply Chain Services. Ashfield Commercial & Medical Services is a global leader in the provision of sales, marketing and healthcare communications services to pharmaceutical manufacturers with operations in major developed markets. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides sales teams, healthcare communications, telesales, nurse educators, medical information, pharmacovigilance, regulatory and event management services to healthcare companies in 19 countries. Sharp Packaging Services is a leading international provider of pharmaceutical contract packaging and clinical trials materials services with facilities in the US, UK, the Netherlands and Belgium. 4

5 Supply Chain Services includes the United Drug Supply Chain Services and the Aquilant Specialist Healthcare Services businesses. The division provides logistics services to healthcare companies, pharmacies and hospitals in the UK and Ireland. United Drug Supply Chain Services is the largest pharmaceutical wholesaler and pre-wholesaler on the island of Ireland. Aquilant Specialist Healthcare Services is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in Ireland and the UK. For more information please go to: 5

6 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART) IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION FOR IMMEDIATE RELEASE 1. Introduction UDG Healthcare PLC Proposed Disposal 18 September 2015 The Board of UDG Healthcare is pleased to announce the proposed sale of the United Drug Supply Chain Services businesses that form part of UDG Healthcare's Supply Chain Services Division; and the MASTA Business, which forms part of the Ashfield Commercial & Medical Services Division, to McKesson, for an aggregate cash consideration of million on a cash and debt free basis. Due to the size of the Disposal, under the Listing Rules the Disposal constitutes a Class 1 transaction and is, therefore, conditional upon the approval of Shareholders. An Extraordinary General Meeting of the Company is to be held at 12 noon on 13 October 2015 for the purposes of approving the Disposal. A circular containing further information on the Disposal, as well as the notice convening the Extraordinary General Meeting to approve the Disposal, will be sent to Shareholders as soon as practicable. 2. Background to and reasons for the Disposal As noted in our annual reports over many years, the Company has been engaged in a diversification strategy, recognising that in its original core business of pharmaceutical wholesaling and prewholesaling, the opportunities for growth were limited due to its market leading position in Ireland, and the fact that other attractive wholesaling markets outside Ireland were already well-served by much larger global entities. This diversification strategy has gained greater momentum in recent years, with the result that the original supply chain services business is no longer the largest contributor to profits and increasingly we have been able to identify attractive acquisition opportunities in our other business areas. In 2014, we sold our share of the UK based prewholesaling joint venture business, UniDrug (now known as Alloga UK), to Alliance Boots and we foresaw the potential that as the global pharmaceutical supply chain sector continues to consolidate, our original Irish businesses could be attractive to the global players. The pharmaceutical supply chain market is in the process of consolidation throughout Europe. While the origins of UDG Healthcare lie in its wholesale business, and whereas for many years we achieved excellent growth through market share gains and a buoyant Irish market, in more recent years this segment has shown little growth despite continuing market share gains as margins have been under continuous pressure. As a result, and after several years of strategic analysis, the Board believes that the Disposal would allow these businesses to prosper under the ownership of McKesson, a more integrated international wholesaler / retailer, and allow the Company to continue to focus on its higher-growth divisions which are engaged in higher value added activities across developed markets. In light of the above decision, the Company has entered into an agreement with respect to the disposal of the United Drug Supply Chain Services businesses that form part of UDG Healthcare's Supply Chain Services Division; and the MASTA Business, which forms part of the Ashfield 6

7 Commercial & Medical Services Division, to McKesson, for an aggregate cash consideration of million on a cash and debt free basis. The Board believes that the proposed cash and debt free price of million is an attractive value for the business, which fully recognises UDG Healthcare's leading market positions in the Republic of Ireland ( ROI ) and Northern Ireland ( NI ). The price represents a multiple of 13.4 times Adjusted EBITA 2 for the Disposed Businesses of 30.3 million for the year to 30 September Summary of terms of the Disposal The Company has agreed to dispose of a number of its businesses to McKesson for a headline consideration, payable in cash on Completion, of million. The final consideration is subject to the adjustments and provisions described below. The Disposed Businesses comprise: the United Drug Supply Chain Services businesses 3 ; and the MASTA Business A share purchase agreement ("SPA") between UDG Healthcare and certain of its subsidiaries and a German incorporated company within the McKesson group was entered into in relation to the Disposal on 18 September The final consideration payable under the SPA will be adjusted upwards or downwards on a -for- basis by reference to completion accounts of the Disposed Businesses which will be prepared by the purchaser within 45 business days of Completion to reflect in full the difference between estimated and actual working capital, net third party debt and intra-group payables, each as at the date of Completion. The Disposal is conditional upon, inter alia: (i) approval by Shareholders; and (ii) clearance from the applicable competition authorities. All consents required from lenders under the Group's finance facilities to permit the Disposal were received on 24 August The Board expects that, subject to the approval of the Disposal by the Shareholders at the Extraordinary General Meeting, the conditions will be satisfied and that Completion will occur on receipt of competition clearance which is currently anticipated to be received by 31 March The Board considers the Disposal to be in the best interests of UDG Healthcare and its Shareholders and intends to recommend that Shareholders vote in favour of the resolution to approve the Disposal at the Extraordinary General Meeting. The Board has received financial advice from Goldman Sachs International in relation to the Disposal. In providing financial advice to the Board, Goldman Sachs International has relied on the Board's commercial assessment of the Disposal Adjusted EBITA of 30.3 million for the year to 30 September United Drug Supply Chain Services businesses comprises the wholesale and pre-wholesale businesses in the Republic of Ireland, the United Drug Sangers business in Northern Ireland and the TCP Group in the Repubic of Ireland. The United Drug Supply Chain Services businesses to be disposed of do not include the Aquilant Business. 7

8 4. Information on the Disposed Businesses United Drug Supply Chain Services comprises the wholesale and pre-wholesale businesses in the ROI and the United Drug Sangers business in NI. The wholesale and United Drug Sangers businesses provide time-critical delivery of pharmaceutical and other healthcare products to retail and hospital pharmacies throughout the island of Ireland. The pre-wholesale business provides distribution, logistical and associated commercial services to pharmaceutical, biotech and consumer companies. Each of the businesses are market leaders in their respective markets. TCP Group provides Direct to Patient Services 4 in the ROI delivering care in the patient s home including dispensing and distribution of pharmaceutical products, nursing services and waste management. MASTA (Medical Advisory Service for Travellers Abroad) 5 is a leading UK service provider in the travel health field, specialising in the sale and distribution of travel and Influenza vaccines. MASTA offers its services through travel health clinics, partner clinics, independent pharmacies, GP practices and occupational health establishments. In the twelve months ended 30 September 2014, these businesses generated revenues of 1,362,678,000 and Adjusted EBITA of 30,323,000. As at 31 March 2015, these businesses had gross assets of 1,034,582, Use of Proceeds and Financial Effects of the Disposal on the Company The Company is expected to receive net cash proceeds (after deductions of transaction taxes, fees and other transactional costs of approximately 25 million, together with certain separation-related costs of approximately 5 million, but prior to post-completion adjustments) of approximately million. Immediately following Completion, the net cash proceeds arising from the Disposal will be deposited with banks or other financial institutions of which approximately 141.5million 6 will be applied to repay the Group s current utilization of the RCF. In applying the net proceeds, the Continuing Group intends to comply with the undertakings it has given in certain note purchase agreements in respect of its US private placement notes. As part of its ongoing strategic planning, UDG Healthcare has ambitious growth plans for the future. It is therefore intended that, in the short to medium term, the balance of the net proceeds will be utilised to realise the strategic priorities of the Continuing Group, including the pursuit of further strategic M&A opportunities. The Board will keep under review the Group s capital structure and potential for shareholder returns over the medium term, depending on operating performance and the availability of these value creating investment opportunities. The pro forma net cash position of the Group as at 31 March 2015 (assuming the Disposal had occurred at that date) including debt is million. 4 The results of the TCP Group have been reported as part of the Supply Chain Services Division since 1 October 2013, prior to which the TCP Group results were included in the Sharp Packaging Services Division. 5 The results of the MASTA Business have been reported as part of the Ashfield Commercial & Medical Services Division since 1 October 2013, prior to which the MASTA Business's results were included in the Sharp Packaging Services Division. 6 $158.5 million converted to million at USD/EUR exchange rate of 1.12 as at 11 September

9 6. Dividend The Company expects to continue its 25 year progressive dividend policy and for the 2016 dividend per share ("DPS") to increase over the 2015 DPS. 7. Information on the Continuing Group Overview of the Continuing Group Following the Disposal, the Continuing Group s business will consist of outsourced commercialisation services to international healthcare clients primarily in the areas of packaging, sales, marketing, communications and medical services. Demand for specialised outsourced services in these areas from the healthcare industry has been increasing in recent years and the Directors expect this trend to continue. Activities of the Continuing Group The Continuing Group will comprise: Ashfield Commercial & Medical Services; a global leader in the provision of outsourced commercialisation, marketing and communication services to the healthcare industry. Ashfield has operations across Europe, the UK, North America, and Japan and has a small presence in South America. Outsourcing services include: Multi-channel sales & marketing solutions Healthcare communications Meetings & event management Clinical nursing solutions Medical affairs & regulatory services Sharp Packaging Services; a pack-to-market solutions business providing clinical and commercial packaging, storage, logistics and project management services to the pharmaceutical and biotech industry. With packaging facilities in the US and Europe, Sharp Packaging Services is well positioned to offer innovative global solutions. This business includes: Commercial packaging Clinical trials packaging & logistics Product serialisation Aquilant Specialist Healthcare Services; a leading distributor of specialist medical, pharmaceutical and scientific products and services providing outsourced sales, marketing, distribution and engineering services to its clients. This business operates in the Republic of Ireland, the UK and the Netherlands and includes: Medical device sales & distribution Specialist pharmaceutical sales and distribution Scientific products sales, distribution & service 9

10 8. Strategic Priorities The strategy of the Group is to focus on maximising Shareholder value from outsourced commercialisation services, by capitalising on its existing market leading positions as the demand for specialist outsourced services in the healthcare sector increases, driving higher levels of growth and profitability. Following the Disposal, the Continuing Group s priorities will therefore be to: develop further and strengthen our existing market positions in higher-growth and highermargin activities; address scale gaps and geographic gaps in key service markets to capitalise fully on the Continuing Group s growth opportunities; acquire additional complementary services which enhance the Continuing Group's position in its chosen markets; and re-align its administrative functions to reflect the new focus of the Continuing Group. 9. Information on McKesson McKesson is incorporated under the laws of the State of Delaware, USA, with its principal executive offices in San Francisco, USA. McKesson's shares are listed on the New York Stock Exchange. McKesson is currently ranked 11th on the FORTUNE 500 and delivers pharmaceuticals, medical supplies and healthcare information technology. 10. Expected timetable to Completion A circular, containing further details of the Disposal and the resolution to approve the Disposal, the Board's recommendation to vote in favour of the Disposal, and the notice of the Extraordinary General Meeting, will be sent to Shareholders as soon as practicable. Completion of the Disposal is expected to occur by 31 March Additional information Following the signing of the agreement with McKesson, the Chief Executive Officer, Liam FitzGerald, informed the Board that he plans to retire on 31 March 2016, stating that after 15 years as CEO pursuing the transformation of the group, he saw the Disposal as the culmination of his efforts and the right time to hand over to his successor. The Board, having been aware for some years of his aspiration to retire early, and having worked with him closely to ensure a strong succession plan, was in a position to announce that the Group Chief Operating Officer, Brendan McAtamney, would succeed him. In addition, the board agreed with Mr. FitzGerald that after his retirement as CEO he would remain on the board in a consulting role until September 2016, to support the transition and the continued strategic development of the group as further investments are pursued. 10

11 Appendix Definitions The following definitions apply throughout this announcement, unless the context requires otherwise: "Adjusted EBITA" "Aquilant Business" "Ashfield Commercial & Medical Services" "Board" or "Directors" "McKesson" "Completion" "Continuing Group" earnings before interest, tax, administrative expenses allocated from UDG Healthcare, amortisation of acquired intangible assets, acquisition costs and exceptional items; the Aquilant Specialist Healthcare Services business of the Group; the Ashfield Commercial & Medical Services Division of the Group; the board of directors of the Company as at the date of this announcement; McKesson Corporation; completion of the Disposal; the Group excluding the Disposed Businesses; "Disclosure and Transparency Rules" the disclosure and transparency rules made by the FCA pursuant to Part 6 of FSMA; "Disposal" "Disposed Businesses" "EBITA" the proposed disposal of the Disposed Businesses by UDG Healthcare plc to McKesson; together (1) United Drug Supply Chain Services (2) the Sangers Business (3) TCP Group and (4) the MASTA Business. The United Drug Supply Chain Services businesses to be disposed of do not include the Aquilant Business; Earnings before interest, tax and amortisation of acquired intangible assets, acquisition costs and exceptional items "Extraordinary General Meeting" "FCA" "FSMA" "Group" "Listing Rules" "London Stock Exchange" the extraordinary general meeting of the Company to be convened for the purpose of asking Shareholders to approve the Disposal; the Financial Conduct Authority of the United Kingdom; the Financial Services and Markets Act 2000 of the United Kingdom; UDG Healthcare plc and its subsidiary undertakings; the listing rules of the FCA; London Stock Exchange plc; 11

12 "MASTA Business" or "MASTA" "Sangers Business" or "United Drug Sangers" "Shareholder(s)" "Sharp Packaging Services" "TCP Group" "UDG" or "Company" means the UK provider of travel health advice and vaccinations and independent wholesale supplier of travel and Influenza vaccinations in the UK; the business and undertakings collectively trading as United Drug Sangers in Northern Ireland together providing distribution services to pharmacies, retailers, hospitals, GPs and other customers; holder(s) of Ordinary shares; the Sharp Packaging Services Division of the Group; the business and undertakings collectively trading as TCP Group through Temperature Controlled Pharmaceuticals Limited and its subsidiaries providing "Direct to Patient Services" in the ROI delivering care in the patient's home including dispensing and distribution of pharmaceutical products, nursing services and waste management; UDG Healthcare plc; "United Drug Supply Chain Services" the business and undertakings collectively trading as United Drug Supply Chain Services in Ireland together providing distribution services to pharmacies, retailers, hospitals, GPs and other customers; and "United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland. 12