Exploring New Horizons: McKesson’s Plan to Divest Rexall
[By: Maiya Keidan] – McKesson Corporation, a prominent player in the U.S. pharmaceutical distribution sector, is reportedly seeking new ownership for its Canadian subsidiary, Rexall Pharmacy Group. This news comes seven years after McKesson’s strategic acquisition of Rexall for approximately C$3 billion ($2.2 billion).
Established in Texas, McKesson has designated CIBC (CM.TO) as the financial advisor for this divestiture. While CIBC has chosen not to comment on this matter, the move marks a significant shift in McKesson’s business strategy.
The 2016 purchase from Katz Group was a pivotal step in strengthening McKesson’s foothold in the Canadian pharmaceutical landscape. Rexall, known for its expansive network of 400 pharmacies and a workforce of 8,000, has been a crucial part of McKesson’s operations in Canada. Moreover, Rexall boasts a robust pharmaceutical distribution sector.
Competition and Strategic Moves in the Canadian Pharmacy Market
In the Canadian pharmacy retail sector, Rexall faces stiff competition from Shoppers Drug Mart, which asserts its dominance with over 1,300 outlets nationwide. Despite repeated attempts to reach Rexall for comments, there has been no response, while McKesson has opted to remain silent on the matter.
Insider sources reveal that McKesson has been actively engaging with potential buyers for Rexall since the previous summer. The process has progressed to the second round of offers, though a deadline for final bids remains unspecified. Interestingly, the sale might exclude Rexall’s pharmaceutical distribution division, which is a key interest area for several bidders. According to reports from The Globe and Mail, even post-sale, McKesson might continue its association with Rexall by supplying pharmaceutical products through its distribution arm.
Potential Buyers and the Future of Rexall
The spectrum of potential buyers for Rexall is diverse, including grocery chains, competing pharmacies, and private equity firms. This development is a part of McKesson’s broader strategy of restructuring its global operations. In 2021, the corporation divested its European businesses in multiple countries, including France and Germany, by selling them to the Phoenix Group.
The pharmaceutical sector in Canada has witnessed fluctuating investment trends. According to Dealogic, the country saw pharmaceutical deal-making soar to $6.8 billion in 2023, a significant increase from $1.8 billion in 2022, although slightly lower than the $7.5 billion peak in 2021.
Conclusion
As McKesson Corporation explores new avenues for Rexall Pharmacy Group, the potential sale marks a pivotal moment in the Canadian pharmaceutical retail industry. With various players showing interest, the outcome of this strategic decision could reshape the competitive landscape. The financial and operational implications of this move will be closely watched by industry analysts and stakeholders alike.
