'Impossible' to say whether Lloydspharmacy's new owner will sell off any branches, says broker

While it is “impossible” to tell yet if McKesson UK's new owner will choose to sell off any Lloydspharmacy branches, buyers would be “definitely interested to pick them up” were they to join the market, a brokerage expert has speculated.

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Scott Hayton: "It's a pretty decent time for people to be approaching the market"

Lloydspharmacy branches would be in a strong position were they to be put on the market, Scott Hayton, director of Hutchings Consultants told C+D yesterday (November 2), following the recent acquisition of the multiple's parent company to a private equity firm. 

Lloydspharmacy’s parent company McKesson announced on Monday (November 1) that it had sold off its UK businesses to Aurelius Group for £477 million.

The deal covers Lloydspharmacy’s 1,325 pharmacies across the UK, the wholesaler AAH, app LloydsDirect (formerly known as Echo), Lloydspharmacy Online Doctor, travel health service MASTA and its John Bell & Croyden branch in London, McKesson said in a statement.

C+D has contacted Lloydspharmacy, McKesson UK and Aurelius for comment on whether there are plans to sell any of the multiple's pharmacies.

"Decent time" to be approaching UK pharmacy market

Mr Hayton told C+D: “It's a pretty decent time for people to be approaching the market. The buyers are out there, the funding is good. The prices are probably as good as they're going to be for quite a long time.”

“One of the key things is, are the buyers out there? Can they raise the necessary funding? So, we can answer yes and yes to both of those questions,” he added.

In recent years, on occasions where McKesson UK had divested of Lloydspharmacy branches, the “buzz and enquiries” these sales generated suggested “that the majority of the market perceived underlying potential in those bricks-and- mortar units”, Mr Hayton told C+D.

“People were quite fast when they were selling and keen to acquire them because they thought, I'm going to be able to turn this around and really make something of this,” he added. “So, people are definitely interested to pick them up.”

Aurelius “likely” to undertake “thorough review of assets”

“We know that Aurelius is an investment group specialising in the turnaround of companies,” Mr Hayton told C+D. “This is a huge sum of money, it's a huge operation.”

He added: “We can only speculate as to whether any further divestment would follow this takeover by Aurelius, but it is likely that, as new owners, they’ll undertake a thorough review of assets over the coming months to better understand how they’ll improve operations going forwards and ultimately deliver returns to their shareholders and investors.

“It's impossible to say. We may see some [branches] come to the market next week. Or they may turn around and say, ‘no, actually, we're going to consolidate these and we want to buy some more’,” Mr Hayton added.

Deal allows McKesson to “focus” on North America

While McKesson confirmed it had sold its UK business to Aurelius for £477m, “the ultimate proceeds from this transaction are subject to certain adjustments under the agreement. Therefore, the proceeds may differ from the announced purchase price”, McKesson chief financial officer Britt Vitalone said in a conference call on Monday on the company’s second quarter fiscal results for 2021/22.

McKesson expects the transaction to close in the fourth quarter of fiscal 2022, until when it will “continue to operate” its UK businesses, Mr Vitalone added.

“The assets involved in this transaction contributed approximately $7.8 billion (£5.7bn) in revenue, and $64 million (£46.9m) in adjusted operating profit in fiscal 2021,” Mr Vitalone said.

He added that the sale will allow McKesson to focus on growing “strategies of oncology and biopharmaceutical services in North America” instead.

The deal follows McKesson’s recent sale of certain European businesses to the Phoenix Group.

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