Adds background in paragraph 2,10,11; details in paragraphs 5-7, analyst comment in paragraph 8

By Abhinav Parmar and Nathan Gomes

April 24 (Reuters) - Parcel giant UPS UPS.N said on Thursday it would buy Canada's Andlauer Healthcare Group AND.TO in an all-cash deal valued at $1.6 billion, boosting its healthcare logistics business.

UPS has been implementing an acquisition-led strategy to expand its premium healthcare business, even as it continues to reduce costs through increased automation, warehouse closures and asset sales.

AHG operates nine distribution centers and 22 branches across Canada, offering services related to third-party logistics and specialized transportation solutions for the healthcare sector. In 2024, the company reported C$650 million ($468.4 million) in revenue, more than half of which was from its ground transportation business.

Under the terms of the agreement, AHG shareholders will receive C$55 per share in cash, representing a premium of 31% to the stock's last close of C$41.96.

Andlauer Healthcare's founder and CEO Michael Andlauer is expected to join UPS as the head of UPS Canada Healthcare upon completion of the transaction, which could be done by the second half of 2025, the company said.

Analysts believe UPS's network should benefit from the addition of Andlauer's temperature-controlled facilities and specialized cold chain transportation capabilities.

"This acquisition bolsters UPS's push into the premium healthcare vertical," Stephens analyst Daniel Imbro said.

In January, UPS completed the acquisition of Germany-based Frigo-Trans and its sister company Biotech & Pharma Logistics, which provides temperature-controlled and time-critical healthcare transportation, boosting its footprint in Europe.

Launched in 2020, UPS Healthcare provides services including inventory management, cold chain packaging and shipping, storage and fulfillment of medical devices, among others.

UPS CEO Carol Tomé said on a conference call with analysts in January that healthcare revenue in 2024 was about $10.5 billion, which the company plans to take to $20 billion by 2026.

(Reporting by Nathan Gomes, Abhinav Parmar and Aishwarya Jain in Bengaluru; Editing by Sriraj Kalluvila and Krishna Chandra Eluri)

((Nathan.Gomes@thomsonreuters.com;))