* Deal funded by mix of cash & debt
* Transaction to add to McKesson's fiscal 2017 profit
(Adds analyst comment, shares)
By Natalie Grover
March 2 (Reuters) - U.S. drug distributor McKesson Corp (NYSE:MCK)
MCK.N said it would buy drugstore chain Rexall Health from
Katz Group for C$3 billion ($2.23 billion) to strengthen its
position in Canada's pharmaceutical supply chain.
The deal will give McKesson access to about 470 retail
pharmacies, and help leverage its existing assets in the
country, particularly in Ontario and Western Canada, the
companies said.
This is the second acquisition announced by San
Francisco-based McKesson in recent weeks. Late last month, it
announced its plan to buy two privately held cancer care service
providers for about $1.2 billion, to add muscle to its specialty
health business.
The more than 150-year old McKesson, which also distributes
drugs to CVS Health Corp (NYSE:CVS) CVS.N , in January said its fiscal
2017 earnings would likely be hit by weak generic drug pricing
and narrowed its profit forecast for 2016.
McKesson's lucrative supply deal with Rite Aid Corp RAD.N
hangs in the balance after the drugstore chain Rite Aid agreed
in October to be bought by Walgreens Boots Alliance Inc WBA.O .
Walgreens sources its drugs from rival distributor
AmerisourceBergen (NYSE:ABC) Corp ABC.N .
Analysts have estimated that the Rite Aid contract is worth
between $15 billion to $25 billion a year for McKesson,
accounting for up to 15 percent of its annual revenue.
Leerink Partners analyst David Larsen said he had greater
confidence that McKesson would come in at the high end of its
fiscal 2017 earnings forecast, and that these acquisitions would
help offset the likely roll-off of the Rite Aid contract in
fiscal 2018.
The Rexall Health acquisition, which will be funded by a mix
of cash and debt, is expected to close later this year and
should modestly add to McKesson's adjusted earnings in fiscal
2017.
McKesson shares were up about 3 percent at $161.14 on the
New York Stock Exchange on Wednesday.
($1 = C$1.35)