TORONTO — Katz Group Canada has signed an agreement to sell Drug Trading Co., its banner pharmacy business, and Medicine Shoppe Canada, its franchise pharmacy business, to McKesson Corp. for about $920 million.
As part of the transaction McKesson is entering into other ancillary agreements with Katz Group. Both Drug Trading and Medicine Shoppe Canada offer purchasing, merchandising and other value-added programs to independent owner-operated pharmacies in Canada.
McKesson will acquire substantially all of the assets of Drug Trading and its pharmacies, numbering around 850; the shares of Medicine Shoppe Canada, with about 160 pharmacies; and a joint ownership interest in ProPharm’s pharmacy software application. ProPharm will work with McKesson through a transition period to ensure McKesson can continue to support independent banner members and franchisees.
“This transaction unlocks significant value through the sale of two outstanding but noncore assets. We will intensify our focus on our corporately owned Rexall and Rexall/Pharma Plus store network to accelerate the growth of our Rexall brand and the value proposition that it represents to our patients and customers,” comments Katz Group chairman Daryl Katz. “We will also accelerate the growth of our related real estate interests.
“We have every confidence that Drug Trading’s independent pharmacy members and Medicine Shoppe’s franchisees will enjoy market-leading pharmacy support and will continue to grow and prosper under McKesson’s leadership. Katz Group Canada will also continue to work with McKesson on a number of strategic initiatives that we believe will create significant long-term value for both companies.”
The acquisition is expected to close in the first half of this calendar year, subject to customary closing conditions. After the closing the banner and franchise operations will be integrated into McKesson’s Canadian pharmaceutical distribution and services business, which is part of McKesson’s Distribution Solutions segment. McKesson will also continue to serve as the primary pharmaceutical distributor to the Katz Group corporate-owned stores.
“The anticipated addition of the banner and franchise operations of Katz Group to our Canadian business reinforces McKesson’s ongoing commitment to the independent segment,” says John Hammergren, chairman and chief executive officer. “This acquisition is a great example of using the strength of our balance sheet to reinforce the value we bring to our customers while creating value for our shareholders.”
Katz Group also announced that its Rexall division has acquired Dell Pharmacies, an 18-store chain operating in southern Ontario with around $70 million in annual sales. Dell Pharmacies has a history of providing pharmacy and health care services. This acquisition is said to be highly complementary to Rexall’s established store base in that market and dovetails with the group’s corporate store strategy.
The Dell stores will be integrated into the Rexall network.