Cardinal Health to Sell Drug Services Unit for $3.3 billion

Cardinal Health, the leading provider of products and services supporting the health-care industry, today announced it has reached an agreement to sell its Pharmaceutical Technologies and Services (PTS) segment to The Blackstone Group for approximately $3.3 billion in cash.

Cardinal Health and Blackstone have signed a definitive agreement for Blackstone to acquire the PTS businesses that develop, manufacture and package medication and other products for pharmaceutical and biotech firms, employ approximately 10,000 at more than 30 facilities worldwide and generate approximately $1.8 billion in annual revenue. Cardinal Health announced on Nov. 30, 2006 that it planned to divest the segment to focus resources on its four remaining segments serving health-care provider customers, such as hospitals and pharmacies.

"We made very rapid progress in less than two months to reach an agreement with such a quality organization as The Blackstone Group," said R. Kerry Clark, president and chief executive officer of Cardinal Health. "The move allows us to accelerate the repurchase of Cardinal Health shares and focus our full attention on our mission to help make health care safer and more productive through our supply-chain and clinical products businesses."

Chinh Chu, Senior Managing Director of The Blackstone Group and Alex Erdeljan, Senior Advisor to The Blackstone Group stated, "We are attracted to the strong industry fundamentals and leadership market positions of PTS in contract manufacturing, drug development, and packaging and printing services. We will work in concert with PTS’ proven and experienced management team to build upon and strengthen their platform of competitive offerings, in order both to accelerate and enhance the growth and profitability of the PTS businesses."

As previously announced, Cardinal Health plans to use the net proceeds from the sale to repurchase shares. The sale is expected to generate approximately $3.1 billion in after-tax proceeds. The net book value of the PTS segment is approximately $2 billion. The sale is expected to close early in Cardinal Health’s fiscal fourth quarter and is subject to customary closing conditions, including regulatory approvals.

Cardinal Health will retain Martindale and Beckloff Associates, two businesses that support the generic pharmaceutical market. Martindale develops generic, intravenous medicine that is complementary to Cardinal Health’s hospital business and generics strategy. Beckloff provides pharmaceutical regulatory consulting, including services for Cardinal Health generic products. Combined, these businesses have approximately 400 employees at two primary locations in the United States and United Kingdom.

PTS is the leading contract manufacturing and service provider for the pharmaceutical industry. Among its core offerings, it develops and manufactures oral and sterile medication in nearly all dosage forms, and holds patents for softgel and Zydis(R) fast-dissolve technologies used in many popular prescription and over-the-counter medicine. The segment is also the largest contract packager of pharmaceuticals.

Blackstone has been a leader in the field of private equity investing since 1987, managing $28 billion through its Blackstone Capital Partners I, II, III, IV, and V and Blackstone Communications Partners funds.