McKesson buys Canada’s Rexall Drugstores for $2.23bn

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McKesson Corp. agreed to acquire Rexall Health, Canada’s No. 2 drugstore chain, from its private owner for C$3 billion ($2.23
billion), as the US distributor of medical products expands its presence in Canada.
Rexall operates about 470 retail pharmacies, and McKesson said it will maintain the brand in Canada. The acquisition of Rexall from Katz Group is being funded by cash and debt, San Francisco-based McKesson said in a statement on Wednesday.
“The acquisition is yet another example of McKesson’s ability to deploy capital to grow earnings and drive return on invested capital,” Steve Halper, an analyst at FBR, said in a research note Wednesday, referring to the latest deal. “Given its healthy free cash flow, these are the exact moves that MCK should be pursuing.”
The deal builds on McKesson’s 2012 acquisition of Katz Group’s independent and franchise pharmacy unit. In Canada, McKesson also operates distribution centers that ship pharmaceuticals to stores, hospitals, clinics and nursing homes. Katz Group is run by Canadian businessman Daryl Katz, who owns the Edmonton Oilers hockey team, which plays home games in the Rexall Place arena.
McKesson shares gained 1.3 percent to $158.69 at the close in New York, and have fallen 20 percent this year.
The deal is the drug distributor’s latest in a series of efforts to expand geographically and deepen its offerings. In 2014, it announced it would buy 10 drugstores from Loblaw Cos., and last year it announced an agreement to buy a drug distribution business in Belgium. Its biggest recent deal was a $1.2 billion acquisition of two oncology businesses, Vantage Oncology LLC and Biologics Inc., which included 50 cancer treatment centers in 13 states.
“The acquisition strengthens McKesson’s position in Canada’s pharmaceutical supply chain, and is a natural next step for two companies that have worked together for over 20 years delivering care to Canadians,” McKesson said in the statement.
McKesson said it expects to complete the deal late this year. The transaction will “modestly” add to fiscal 2017 adjusted earnings, and will boost earnings more the following year, McKesson said.
McKesson Corporation is an American company distributing pharmaceuticals at a retail sale level and providing health information technology, medical supplies, and care management tools. The company had sales of $122 billion in 2012
McKesson is based in the US and distributes health care systems, medical supplies and pharmaceutical products.
Additionally, McKesson provides extensive network infrastructure for the health care industry; also, it was an early adopter of technologies like bar-code scanning for distribution, pharmacy robotics, and RFID tags.

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