McKesson, the parent company of LloydsPharmacy and AAH in the UK, has signed an agreement to sell some of its European business to the German pharmaceutical distributor Phoenix Group.
The deal encompasses the sale of its operations in France, Italy, Ireland, Portugal, Belgium, and Slovenia, as McKesson looks at “strategic path” to fully exit the European region.
The transaction also includes McKesson’s German-based headquarters in Stuttgart, Recucare, its German wound-care business, its shared services centre in Lithuania, and its 45% ownership stake in Brocacef, the company’s joint venture in the Netherlands.
The financial terms of the deal were not disclosed but it is expected to be completed in 2022, subject to closing conditions, including regulatory approvals.
Fresh reports that McKesson was looking to sell all of its European operations emerged last month following a prolonged period of underperformance in the region. Phoenix, the owner of the Rowland’s pharmacy chain in the UK, was named at the time as a potential buyer for the continental European unit, whilst sources said that separate discussions were underway to offload LloydsPharmacy and AAH to a private equity firm.
McKesson stated yesterday that its remaining European businesses in the UK, Norway, Austria, and Denmark were not included in the transaction with Phoenix and would continue under its ownership. However, the US firm said was committed to “exploring strategic alternatives” for all remaining European businesses as it looks to focus its future investments on its activities outside of the region.
McKesson added that it will retain its minority equity stake in the company’s Germany joint venture with Walgreens Boots Alliance.
“Today’s transaction marks an important step in advancing McKesson’s commitment to streamline the business and prioritise investments in the areas where we have deep expertise and are central to our long-term growth strategy,” said Brian Tyler, the group’s Chief Executive.
“We are confident that under the Phoenix group’s strong leadership, the businesses included in this agreement will be well-positioned for the future to compete more effectively and better serve customers.”
The 1,400-strong LloydsPharmacy chain is currently struggling with the tough conditions in the sector. Its sales have fallen in the last few years and the retailer’s most recent accounts for the year to 31 March 2020 show turnover fell 1.6% to £1.95bn with an operating loss of £118.4m as it continued with its turnaround programme.
LloydsPharmacy has closed hundreds of outlets in recent years, blaming government funding cuts and higher operating costs. At the end of 2020, it called for health centre landlords to recognise the impact of reduced footfall during the pandemic and renegotiate unsustainable rents or risk further closures of unviable pharmacies.
The Phoenix Group, which has pharmaceutical wholesale and pharmacy retail operations across Europe, saw its revenues increase 3.2% to €28.2bn last year despite the volatile trading conditions.
NAM Implications:
- Speed of disposal to Phoenix will determine McKesson pace in moving on a final deal for LloydsPharmacy.
- As they finally sever most links with the EU.
- Begging the question, why?
