Cardinal Health: Two Strategic Acquisitions Worth $3.9 Billion Bolster Growing Specialty Portfolio

Narrow-moat Cardinal Health announced that it entered into agreements to complete two transactions. First, Cardinal will acquire a 71% majority stake in GI Alliance for $2.8 billion with a call right to purchase up to 100% of the remaining equity beginning on the third anniversary of closing. GIA is one of the leading gastroenterology management services organizations, or MSOs, in the US and supports over 700 independent gastroenterologists across 345 practice locations. Second, Cardinal is to acquire the Advanced Diabetes Supply Group for $1.1 billion. ADSG is a leading diabetic medical supplies provider that serves close to half a million patients annually. We don’t anticipate any regulatory challenges with the deals, and management expects them to close in early 2025. At first glance, we are maintaining our fair value estimate of $107 per share and our Standard Capital Allocation Rating.