US McKesson completes acquisition of Canadian Rexall Health

McKesson Corporation, a leading international healthcare services and information technology company, has announced that it has completed the previously announced acquisition of Rexall Health for $2.9 billion CAD ($2.1 billion USD, or approximately $1.7 billion USD, net of certain estimated purchase price adjustments, proceeds from store divestitures, and tax benefits). This follows the agreement reached with the Competition Bureau of Canada for the acquisition of Rexall Health and approval received under the Investment Canada Act.
As part of the transaction, McKesson has acquired approximately 470 retail pharmacies, and has agreed to divest stores in 26 local markets that the Competition Bureau of Canada identified during its review of the transaction.
McKesson also announced that Domenic Pilla has been appointed CEO of McKesson Canada, effective January 3, 2017. Pilla will report to Paul C Julian, executive vice president and group president, McKesson Corporation, and assume overall leadership responsibility for McKesson’s distribution and retail businesses in Canada, including Rexall Health. Jürgen Schreiber, currently CEO of Rexall Health, will leave to pursue other opportunities.
“Today’s announcement marks a milestone for McKesson and Rexall Health. With complementary assets, industry expertise, and shared values, we will now serve our customers with enhanced retail pharmacy capabilities and a broader reach across Canada,” said John H Hammergren, chairman and chief executive officer, McKesson Corporation. “Patients across Canada will benefit from best-in-class pharmacy care through innovative care solutions and an expanded retail footprint. We are thankful to Daryl Katz, founder and chairman of Katz Group, one of Canada’s largest privately-owned enterprises, for having built such a strong pharmacy asset in the Canadian market.”
With Rexall Health, McKesson will be able to serve a broad range of pharmaceutical care and ensure choice to consumers at a time when Canadians are increasingly turning to pharmacies for their healthcare advice and services.
“Together, McKesson and Rexall can leverage shared expertise to grow and deliver better care and value to Canadians,” said Julian. “McKesson has a strong track record of delivering leading service levels to customers and patients.”
“Domenic Pilla is uniquely qualified to lead our expanded portfolio in Canada based on his previous experience as president of Shoppers Drug Mart and McKesson Canada,” Julian continued. “He brings deep knowledge of both the wholesale and retail sides of the business, and a proven track record of delivering results. We thank Jürgen Schreiber for his outstanding leadership in bringing this acquisition to fruition and wish him the greatest success.”
Rexall Health will continue to have a dedicated management team in Canada under Pilla, while retaining the existing brand Canadians have come to know and trust. Pilla is expected to appoint a new president of Rexall Health in the future to provide day-to-day leadership for Rexall. His other direct report will be Paula Keays, president of McKesson Canada.
McKesson now expects Rexall Health to be flat to adjusted earnings per diluted share for Fiscal 2017 as earnings attributable to Rexall Health will be offset by an anticipated charge related to a fair value adjustment of acquired inventory. McKesson expects the acquisition will be 30 to 35 cents accretive to adjusted earnings per diluted share by the third year following the close of the transaction, on a constant currency basis.