McKesson Canada makes bid for Quebec’s Uniprix pharmacy group

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This article was published 19/01/2009 (6268 days ago), so information in it may no longer be current.

MONTREAL – Medicine distributor McKesson Canada is looking to buy Quebec’s No. 2 pharmacy chain, Uniprix Inc., in what analysts describe as a defensive move to maintain retail customers in the province.

Under the deal that had been rumoured last July, McKesson would acquire Uniprix’s shares and member-pharmacists in the co-operative style chain of 400 outlets would remain owners of their pharmacies.

Financial details of the offer were not disclosed.

The deal continues the recent growth in Quebec by McKesson Corp. (NYSE:MCK), a San Francisco-based distributor of pharmacy products.

Last summer, McKesson bought a 270-outlet Quebec chain that operates under the Proxim and ProxiMeds banners.

“McKesson Canada is enthusiastic about the prospect of this transaction, which will strengthen our long-standing business relationship with the Uniprix Group for the distribution of pharmaceutical products, over-the-counter medications, and consumer products,” McKesson president Domenic Pilla said in a statement.

He said the offer would provide “enhanced product and service offerings to customers, while bringing increased financial flexibility to the banners and sustaining its network of independent pharmacy owners.”

The company wouldn’t specify how that will be achieved.

Uniprix owns and operates the Uniprix, Unipharm and Uniclinique banners and has annual sales of about $1.6 billion, making it the second-largest in Quebec.

It is a co-operative with independent owners who are often courted – and sometimes picked off – by retailing powerhouses such as market leader Jean Coutu (TSX:PJC.A) and Shoppers Drug Mart (TSX:SC), owner of the Pharmaprix brand in Quebec.

That leaves McKesson increasingly vulnerable to lose business because these chains purchase more of their drugs from other sources.

Uniprix president and chief executive Francois Castonguay said the long business relationship between the two companies that goes back about three decades makes Monday’s transaction “a natural partnership.”

Castonguay and Uniprix’s senior management will remain in place, said spokesman Pierre Gince.

An industry analyst said the deal won’t change the pharmacy landscape in Quebec unless Uniprix pharmacists are willing to invest to upgrade their stores and pay to keep independent pharmacists within the network

“The reason this deal is getting done is because the Uniprix members don’t want change, at least not huge change,” said an analyst who didn’t want to be named.

The average Uniprix store is small and doesn’t offer a wide variety of high-margin front-end products, he added.

McKesson spokeswoman Line Chapdelaine declined to comment for competitive reasons on possible store upgrades and any impact the deal will have on customers.

“This transaction would strengthen the longstanding business relationship between McKesson Canada and the Uniprix Group for the distribution of pharmaceutical products, over-the-counter medications, and consumer products,” she said in an e-mail.

Industry observers believe Uniprix may have been courted by several potential buyers, including Metro Inc. (TSX:MRU.A), the grocery chain that operates Brunet pharmacies, and the Katz Group, which operates PharmaPlus, Guardian, IDA and Rexall stores.

But Jacques Nantel, a marketing professor at Montreal’s business school H.E.C., said he doesn’t believe Quebec pharmacy leader Jean Coutu was among them.

“For Jean Coutu it makes more sense that they proceed on individual cases (for independent pharmacies) than buy a complete network,” he said in an interview.

Last summer, McKesson Canada bought Groupe PharmEssor Inc., owner of the Proxim and ProxiMeds drug store brands, with about 270 independently owned outlets in Quebec.

McKesson is a health care services and technology company with nearly 33,000 employees around the world.