Acquisition creates pharmacy powerhouse

The company that owns PharmaPlus Drug Marts and Pharmx/Rexall is set to swallow the drugstore network that includes IDA and Guardian, creating a new powerhouse in the sector to take on Shoppers Drug Mart Corp.

The Globe and Mail
November 7, 2001

Acquisition creates pharmacy powerhouse
Marina Strauss

The company that owns PharmaPlus Drug Marts and Pharmx/Rexall is set to swallow the drugstore network that includes IDA and Guardian, creating a new powerhouse in the sector to take on Shoppers Drug Mart Corp.

Katz Group Inc. of Edmonton, which has more than 600 pharmacies under PharmaPlus and other banners, said yesterday it has acquired Drug Trading Co. Ltd. of Markham, Ont., whose 750 pharmacies are under the IDA, Guardian and RxCentral names, among others.

Combined, that gives the two chains more stores than Shoppers, which operates just over 800 outlets.

The new drugstore chain will ring up annual sales of about $3.25-billion in Canada (and $5-billion when including its U.S. pharmacies), while Shoppers' annual system-wide sales are more than $4.5-billion.

"It's a sign of the times," retail consultant Len Kubas said.

"There's increasing consolidation in all sectors of the economy. In retail in particular, if you go up against the giants, you need critical mass.

"How else do you compete against Shoppers Drug Mart?"

Katz Group, which had considered buying Shoppers about two years ago, makes the acquisition just as Shoppers prepares to go public and expand its store operation even further.

The planned purchase cashes in on the growing demand for drugs from an aging population.

As well, drugstores have fared relatively well in the economic downturn, carrying many essential products that are generally recession-proof.

Daryl Katz, chairman of Katz Group, said the company plans to expand Drug Trading, bringing more independent pharmacies under its umbrella.

But Drug Trading and its divisions will continue to operate as separate entities, maintaining its mission to foster independent pharmacy, he said.

The alliance of the two drugstore chains will provide them with more opportunities for cost savings "thus creating greater value throughout each network," he said.

The deal, which is to close by the end of this month, has got regulatory and shareholder approvals.


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