McKesson buys into Canada pharma network for $1.2B

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McKesson has signed a definitive agreement to purchase Drug Trading, an independent banner business of Katz Group Canada and Medicine Shoppe Canada, the franchise business of the Katz Group. The purchase price is approximately CAD$920 million (USD$1.21 billion), which McKesson expects to fund from its available cash.

Katz Group is a privately-owned company that operates a retail pharmacy network in Canada. The San Francisco-based McKesson said the acquisition is expected to close in the first half of this calendar year, subject to customary closing conditions, including all necessary Canadian regulatory clearances.

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 also will continue to serve as the primary pharmaceutical distributor to the Katz Group corporate-owned stores.

Under the terms of the agreement, McKesson will acquire substantially all of the assets of Drug Trading, which consists of a marketing and purchasing arm for a network of more than 850 independently-owned pharmacies located in Ontario, Western Canada and Atlantic Canada, the majority of which operate under the brands I.D.A. and Guardian. McKesson also will acquire Medicine Shoppe Canada, which operates the franchise business of providing services to more than 160 independent pharmacies also located in Ontario, Western Canada and Atlantic Canada.

As part of the transaction, McKesson will acquire joint ownership of the ProPharm software application, which supports pharmacy dispensary systems. ProPharm will work with McKesson through a transition period to ensure McKesson can continue to efficiently support independent banner members and franchisees when the transaction closes and thereafter.

McKesson Canada currently operates several banner groups, including Proxim, Associated Retail Pharmacy and Family Health Care Pharmacy. The newly acquired banner groups will be operated in a manner similar to McKesson’s three existing banners, which means member-pharmacists will remain owners of their pharmacies and will retain sole responsibility for the management of their business.