Why PSS World Medical Shares Skyrocketed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of medical products distributor PSS World Medical (Nasdaq: PSSI  ) soared a whopping 32% today after drug wholesale giant McKesson (NYSE: MCK  ) offered to acquire it for $1.46 billion.

So what: The all-cash deal values PSS at $29 per share and represents a 34% premium to its closing price on Wednesday. McKesson is making the move to boost margins at its surgical devices supply segment, and judging from its own stock's 5% jump today, Wall Street seems pleased with the price being paid to do it.

Now what: By the fourth year after the close of the deal, McKesson expects to realize annual pre-tax synergies of more than $100 million. "The unified organization will bring extensive distribution capabilities, deep product and technology expertise and a broad portfolio of business services to an expanding industry, helping our customers improve efficiency and productivity, and deliver better care," McKesson Chairman and CEO John Hammergren said. So while PSS shares are likely all popped out, McKesson's newly bolstered scale might be a driver of market-topping gains going forward.

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Interested in more info on McKesson? Add it to your watchlist.

Fool contributor Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend McKesson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Related Tickers

10/24/2016 9:57 AM
MCK $162.46 Up +1.43 +0.89%
McKesson CAPS Rating: *****
PSSI.DL $0.00 Down +0.00 +0.00%
PSS World Medical,… CAPS Rating: No stars