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McKesson Buys Canadian Pharmacy Marketing Group for $918 Million

Jan. 30 (Bloomberg) -- McKesson Corp., the biggest U.S. drug distributor, said it agreed to spend about $918 million for the marketing and franchising businesses of more than 1,000 Canadian independent pharmacies.

McKesson will buy Drug Trading Co. and Medicine Shoppe Canada Inc. from Katz Group Canada Inc., a closely held Edmonton, Alberta-based company. The deal is expected to close in the first half of this year, subject to regulatory approval in Canada, San Francisco-based McKesson said today in a statement.

The deal gives McKesson the marketing and purchasing arms for a network of 850 independent drugstores in Canada, and the franchise business for 160 Medicine Shoppe pharmacies, the company said in its statement. McKesson already is the main drug distributor for the units and will integrate operations into its existing Canadian business.

The purchase “reinforces McKesson’s ongoing commitment to the independent” drugstore business, Chief Executive Officer John H. Hammergren said in the statement.

The deal is expected to be neutral to McKesson’s adjusted earnings in its current fiscal year, and add to earnings the first year after closing, McKesson said. The drug distributor will pay for the deal with cash.

McKesson also reported earnings excluding certain items for the fiscal third quarter ended Dec. 31 of $1.40 a share, topping by 3 cents the average estimate of 18 analysts compiled by Bloomberg. Revenue increased 9 percent to $30.8 billion.

The company’s shares gained 3.4 percent to $81.35 at 5:57 p.m. New York time in extended trading after the acquisition and earnings were announced. Earlier, McKesson declined less than 1 percent to $78.69 at the close.

To contact the reporter on this story: Robert Langreth in New York at rlangreth@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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