Canadian firm Birch Hill inks deal with Texas-owner of Rexall, Well.ca

Toronto-based private equity firm Birch Hill Equity Partners has announced that it will acquire the Rexall Pharmacy Group and Well.ca from McKesson Corp., bringing both brands under Canadian ownership.

Birch Hill Equity Partners did not disclose the financial details of the transaction with McKesson, a Texas-based healthcare services company. McKesson stated that selling the two companies would allow it to concentrate on expanding its oncology and biopharma divisions.

This acquisition will give Birch Hill, which has previously invested in companies such as Mastermind Toys, Sleep Country, and Ace Bakery, a foothold in the pharmacare industry and test its retail capabilities once again.

Rexall operates 385 pharmacies across Canada and employs approximately 8,000 people, while Well.ca offers over 40,000 health and wellness products online.

The sale could potentially "accelerate the expansion and innovation of these brands in Canada," according to Liza Amlani, co-founder of the Retail Strategy Group, in an email. She noted that "Rexall has a fraction of stores in Canada compared to Shoppers Drug Mart," referring to Loblaw Companies Ltd.'s pharmacy chain, which has more than 1,300 locations.

"The new leadership team could help innovate Rexall and make them more competitive with Shoppers Drug Mart, which currently has a dominant market presence," Amlani added.

Birch Hill declined to comment further on the deal but stated in its announcement that it is "committed to maintaining and investing in reliable, accessible health care services to expand Rexall’s network of pharmacies across Canada." The firm also mentioned that McKesson will continue as the wholesale distribution supplier for both Rexall and Well.ca, ensuring a smooth transition.

Joanne McNeish, an associate professor at Toronto Metropolitan University with a focus on marketing, suggested that McKesson's decision to remain as a wholesale supplier indicates it views this segment as more profitable than the retail aspect. McNeish also expressed some concern about Birch Hill being a private equity firm, noting, "When I think of private equity companies, it seems to me they act like house flippers," and added that these firms often lack long-term investment and management.

Amlani, while not commenting on how long Birch Hill might retain the brands, saw the deal as an opportunity to rejuvenate Rexall and Well.ca, suggesting they both need significant improvements. "Rexall needs an upgrade to its stores, loyalty program, and product mix," she said, while noting that "Well.ca has a vast product assortment but could benefit from stronger brand power and increased investment in marketing."