Chain to become part of distributor's McKesson Canada unit

TORONTO — McKesson Corp. plans to acquire Canadian drug store operator Rexall Health from Katz Group for $1.9 billion ($3 billion Canadian).

McKesson and Katz Group said Wednesday that the deal will strengthen McKesson’s position in Canada’s pharmaceutical supply chain and is described as a natural step for two companies that have worked together for over 20 years delivering care to Canadians.

“The acquisition of Rexall Health 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,” John Hammergren, chairman and chief executive officer of McKesson, said in a statement. “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 Rexall Health will continue to flourish under McKesson’s ownership and Rexall Health CEO 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,” he said.

“Today is an exciting day for Rexall Health and its employees,” 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. We share a culture of respect for patients and the employees who serve them every day,” said Julian.

Rexall Health will continue to have a management team in Canada led by Schreiber, while retaining the existing brand.

“For over one hundred years in Canada, McKesson has helped build a strong network of independent pharmacies,” said Alain Champagne, president, 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 of Rexall Health 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 solutions and industry-leading service levels.

With the purchase of Rexall Health’s approximately 470 retail pharmacies and other businesses, McKesson Canada will have an estimated 13,000 employees, serving customers and patients throughout the country. Rexall Health will help McKesson leverage its existing portfolio of assets to drive growth along the entire value chain, particularly in two of Canada’s fastest-growing regions, Ontario and Western Canada.

The acquisition, which will be funded by a mix of cash and debt, is expected to close late in calendar year 2016.