Katz Group-McKesson deal sets stage for greater shifts in Canadian market

WHAT IT MEANS AND WHY IT'S IMPORTANT — The move by Katz Group to shed its independent and franchise businesses marks a shift in the Canadian market and likely sets the stage for even more changes north of the border. And while it remains unclear just how the pharmacy retail landscape in Canada will look in the years ahead, what is clear is that the winds of change are blowing, and industry eyes will remain fixed on the Canadian market, perhaps now more than ever.

(THE NEWS: Katz Group to sell independent, franchise businesses to McKesson. For the full story, click here.)

As the article states, Katz Group Canada has signed a definitive agreement to sell its banner pharmacy business, Drug Trading, and its franchise pharmacy business, Medicine Shoppe Canada, to McKesson for about CAD $920 million in cash.

Katz Group stated that the sale to McKesson will enable the former to focus on its corporate-owned Rexall and Rexall/Pharma Plus store network. So as new CEO Frank Scorpiniti, who officially succeeded Andy Giancamilli on Feb. 2, settles into his new role and focuses on the core banner, industry members pretty much can bet on seeing even more changes down the road.

In fact, Katz Group has announced that its Rexall division has acquired Dell Pharmacies, an 18-store chain operating in southern Ontario with approximately $70 million in annual sales. The Dell stores will be integrated into the Rexall network.

The sale to McKesson also creates cash for the company potentially to go out and acquire another Canadian operator, as some have expected it might.

Meanwhile, Target unveiled an unconventional plan for how it will build a pharmacy presence in Canada. It will utilize a pharmacy franchise model for its stores north of the border, the first of which will open in March/April 2013. That strategy is different than in the United States, where Target operates its own in-store pharmacies.

While it remains unclear just how the pharmacy retail landscape in Canada will look in the years ahead, what is clear is that the winds of change are blowing and industry eyes will remain fixed on the Canadian market, perhaps now more than ever.

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