Healthcare services group United Drug has made its biggest acquisition, paying €21 million (£16.5 million) for the privately-owned British group, Ashfield Healthcare.

Most of the consideration is cash, but United Drug is also issuing €1.75 million worth of its own shares - about 1 per cent - to the owners of Ashfield.

A further €7 million will be paid over the next two years, depending on profit targets being achieved.

The move by United Drug is its second into the area of contract sales outsourcing, where companies effectively contract out their selling function.

Late last year, United Drug bought Healthcare Resources, a small Irish business based in Dublin.

The Ashfield acquisition, however, is a much more significant move as the British group is the second biggest such operation in the British market.

Based near Birmingham, Ashfield was founded three years ago and has enjoyed strong growth.

It had profits last year of £1.67 million sterling (€2.9 million), with net cash at the end of 1999 of £3.2 million sterling.

United Drug chief executive Mr Jerry Liston said the company's strategy was to focus on areas complementary to its existing business.

"One of our objectives is to offer new services to healthcare manufacturers.

"The contract sales outsourcing market is viewed as attractive to United Drug as it reflects the growing demand by manufacturers to outsource their selling activities," he said.

"In addition, both Ashfield and United Drug possess a shared client base - United Drug in distribution, and Ashfield in contract selling.

"We believe the enlarged United Drug, incorporating Ashfield, can leverage the existing client base of both entities to become the healthcare manufacturers' partner of first choice in contract distribution, contract selling and business process outsourcing."