TORONTO — McKesson Corp.’s $2.2 billion deal to acquire Rexall Health from Katz Group will strengthen the drug distributor’s position in Canada’s pharmaceutical supply chain.
McKesson said the agreement is a natural next step for two companies that have worked together for over 20 years. In 2012, McKesson bought Katz’s 1,100-store banner operation covering I.D.A., Guardian and Medicine Shoppe Canada outlets.
Picking up Rexall’s 470 pharmacies will give McKesson Canada close to 2,500 units, solidifying its position as the No. 5 North American drug chain by store count.
Rexall will help McKesson leverage its assets to drive growth along the entire value chain, particularly in two of Canada’s fastest-growing regions, Ontario and the western provinces. The purchase follows the 2014 acquisition of Shoppers Drug Mart (SDM) by Loblaw Cos., which significantly boosted the purchasing power of Canada’s No. 1 drug chain by dollar volume.
Rexall will continue to be led by Jürgen Schreiber, who was named chief executive officer last spring. Schreiber had also headed SDM before stepping down in 2011. McKesson will retain the Rexall name, the San Francisco-based health services company said. Along with the pharmacies, it will pick up Medicentres Canada health clinics and ClaimSecure, a health care management and technology firm.
The deal, expected to close late this year, “supports McKesson’s commitment to drive value in the industry by improving health care solutions delivered in the pharmacy; it enhances our ability to provide best-in-class pharmacy care through an expanded retail footprint for patients across Canada,” said John Hammergren, chairman and chief executive officer of McKesson. “Canada’s health care environment is rapidly evolving; it is marked by a move of primary care into pharmacy and increasingly complex patient demand. With today’s announcement, McKesson will bring together the strengths and expertise of our diverse portfolio to address challenges and opportunities in delivering the very best patient care.”
Daryl Katz, founder and chairman of Katz Group, said, “I have the utmost confidence that Rexall Health will continue to flourish under McKesson’s ownership and Jürgen Schreiber’s continued leadership. I want to thank everyone who has helped to make Rexall Health a success over the past two decades, including all of our current and former employees, our partners, and above all our customers for their loyalty and dedication.
“Going forward, Katz Group will continue to invest in the growth of our three other lines of business: real estate, sports and entertainment, and private and public investments.”
Said Schreiber, “With McKesson, we will ensure Rexall Health continues to deliver the highest-quality care to its patients and service to its customers.”
Like McKesson Canada, the operations of Rexall Health will be part of McKesson’s Distribution Solutions segment, reporting to Paul Julian, executive vice president and group president. “We are looking forward to welcoming Rexall Health, its leadership team and employees to McKesson,” said Julian. “We share a culture of respect for patients and the employees who serve them every day.”
“For over 100 years in Canada, McKesson has helped build a strong network of independent pharmacies,” said Alain Champagne, president of McKesson Canada. “With the acquisition of Rexall Health, McKesson will continue to deliver value-added pharmacy solutions through an expanded portfolio, while providing operational excellence to small-business owners, independent pharmacists and our pharmaceutical distribution customers.”
The acquisition will enhance McKesson’s retail pharmacy capabilities and procurement scale. McKesson Canada’s diverse customer base, including its independent pharmacists, is expected to benefit from competitive pharmacy programs and industry-leading service levels. The deal will bring McKesson Canada’s number of employees to 13,000.
The acquisition will be funded by a mix of cash and debt. McKesson expects the transaction to be modestly accretive to adjusted earnings per diluted share for fiscal 2017.