LloydsPharmacy owner McKesson in talks to sell high street giant

·3-min read

The American owner of the LloydsPharmacy chain is in talks to sell one of Britain’s biggest drug retail and wholesale groups amid warnings about the industry’s future financial viability.

Sky News has learnt that McKesson, a New York-listed group with a market value of $29bn, has hired bankers to explore a sale of its UK operation.

City sources said that bankers at Barclays were working with McKesson on a disposal of the business and had begun contacting prospective bidders in recent weeks.

The proposed sale could have significant implications for the future of Britain's high street pharmacy and drug distribution sectors.

By some measures, McKesson is the biggest competitor in the UK to Boots the Chemist and its parent company, Walgreens Boots Alliance.

McKesson owns LloydsPharmacy, which operates a network of more than 1,400 sites across the UK, employing more than 17,000 people, according to its website.

Hundreds of its outlets are based in GP surgeries.

The LloydsPharmacy estate was assembled over decades through the absorption of prominent industry names such as Savory & Moore, Cross & Herbert, Kingswood GK and Hills Pharmacy.

In 2016, the company bought Sainsbury's network of nearly 300 in-store chemists.

LloydsPharmacy became part of McKesson in 2014, when the American group bought Celesio in a £5bn deal.

As a consequence of that takeover, McKesson also became the owner of All About Health (AAH), the UK's biggest drug wholesaler, which distributes more than 15m items each week to 14,000 community pharmacies across the country.

McKesson's other UK operations include Masta, a provider of private vaccination services and John Bell & Croyden, a royal warrant-holding pharmacy in London's Mayfair which has been enlisted as part of the government's COVID-19 vaccination programme.

John Bell & Croyden opened in 1798 and claims to have been Her Majesty The Queen's pharmacist since 1958.

It was unclear on Tuesday whether all of Texas-headquartered McKesson's UK subsidiaries would be included in the sale process.

One source suggested that the entire UK operation could command a price tag of approximately £400m.

The takeover of Celesio and its British business has not proved to be a resounding success for McKesson.

In accounts filed at Companies House for the year to 31 March 2019 - the most recent statement available - loss-making LloydsPharmacy described it as "another exceptionally challenging year".

It said reductions in drug reimbursements from the public purse during the course of the year had "impacted store profitability significantly", resulting in the closure of 60 outlets.

More recently, there have been warnings about the viability of independent pharmacies, while the head of the sector's trade body raised the prospect of industrial action unless the Treasury agreed to write off £370m of debt owed by industry practitioners.

When contacted by email and telephone, Steve Race, McKesson's UK head of public affairs, refused to confirm any details about its UK operations, describing it as "publicly available information".

He also declined to comment on the prospective sale of its UK business.