DRUG-DISTRIBUTION GIANT TO BUY DATA FIRM

McKesson Corp., the nation's largest drug distributor, said late
Sunday that it would buy HBO & Co., the nation's largest supplier of
computerized patient-monitoring systems in a stock swap valued at
about $14 billion.

McKesson HBOC, as the company will be called, expects to be the
nation's leading health care services company when the deal is
completed next spring. It will supply drugs and services to 5,000
hospitals, 25,000 retail pharmacies, 10,000 extended-care sites and
35,000 physicians' groups.

The two companies had tried to reach a merger agreement this summer,
but the deal fell apart when word leaked out and HBO's shares fell
sharply. Since then, both had made other deals in the rapidly
consolidating drug industry, including HBO's announcement last month
that it would acquire Access Health Inc. in a $1 billion stock swap
that would extend its reach into patient-management systems for
insurers and managed care companies.

Mark Pulido, the president and chief executive of McKesson, said the
two companies resumed bargaining after customers kept urging them to
combine.

The two companies had tried to reach a merger agreement this summer,
but the deal fell apart when word leaked out and HBO's shares fell
sharply. Since then, both had made other deals in the rapidly
consolidating drug industry, including HBO's announcement late last
month that it would acquire Access Health Inc. in a stock swap that
would extend its reach into patient-management systems for health
insurers and managed-care companies. Such systems help insurers decide
whether to authorize hospitalization for patients and provide
telephone counseling for patients.

Pulido said the two companies went back to the bargaining table after
customers kept urging them to combine.

The deal will give stockholders of HBO, based in Atlanta, 0.37 share
of McKesson for each of their shares. McKesson is based in San
Francisco. The price represents an 11 percent premium over HBO's
closing price of 29 9/16 Friday.

McKesson, based in San Francisco, expects the deal to begin adding to
earnings in its first year because of an estimated $75 million gain
from what it described as `synergies and cross-selling opportunities.
HBO has 350 employees selling to hospitals compared to just 50 for
McKesson while McKesson's 550 strong sales force calling on physicians
dwarfs HBO's group of 50.

``There's low hanging fruit,'' said Pulido of the opportunities to
sell each other's products and services. Pulido will be chief
executive of the merged company. Charles McCall, now chairman, chief
executive and president of HBO, will become chairman.

The deal came shortly after McKesson's major rival, Cardinal Health
Inc., had diversified by acquiring Allegiance Corp., a major
distributor of hospital supplies.

Both Cardinal and McKesson had announced deals this year to acquire
other large drug distributors only to have those plans scuttled by
federal antitrust regulators. Cardinal wanted to acquire Bergen
Brunswig, and McKesson, a smaller rival called AmeriSource Health, but
the Federal Trade Commission was worried that consumers would be hurt
by having just two companies control 80 percent of drug
distribution.

McKesson is far larger than HBO, with $19.7 billion in revenues in the
twelve months ending Sept. 30 compared with $1.46 billion for HBO. But
HBO has been growing faster and far more profitable.

McKesson traces its history to a Manhattan drugstore opened in 1833 by
John McKesson. In addition to distributing drugs, McKesson distributes
robotic drug handling systems and management services to pharmacies.
It became the nation's largest distributor of surgical supplies last
year by acquiring General Medical for $775 million. Its McKesson Water
Products subsidiary, which owns the Alhambra and Crystal brands, is
the third largest marketer of bottled water behind Nestle and Suntory.

HBO was founded in 1974 as the outgrowth of an attempt by a group of
hospitals in central Illinois to develop a shared patient accounting
system. Its name reflects those of its founders, Walter Huff, Bruce
Barrington and Richard Owens.

Pulido said the new company would be able to help customers reduce
$180 billion spent annually on administrative costs and save $330
billion by avoiding inappropriate care to patients because of
inadequate information about their status or unavailability of the
most appropriate treatment.

Checked-by: Patrick Henry