Billionaire Daryl Katz has recently been in the news because of his $3 billion deal to sell his Rexall Drug stores to McKesson, an American pharmaceutical giant. Why did Katz buy the chain, only to sell it later? The story has its roots in family and embodies some vital lessons about personal growth and keeping up with industry changes.
Building the Family Business
Katz grew up in drugstores. Katz’s father, Barry, was a pharmacist and owned three drug stores when Daryl was a boy. The elder Katz has described his son as “a terror in the store,” saying young Daryl would run through the aisles knocking boxes off the shelves.
By the time Katz was ready to be productive in the business, his father had founded Value Drug Mart Associates, a collective of more than a dozen stores that chose to cooperate in order to hold their niche against larger players, leveraging their manufacturing and distribution networks to stay competitive as independent owners. That group now includes 33 stores.
Setting a Growth Trajectory
For all his organizational skill, Barry Katz was a friendly neighborhood pharmacist at heart, dedicated to serving his customers and promoting good health in his community. His son Daryl grew up to be an attorney and savvy businessman who would expand the family’s holdings exponentially. In partnership with his father, Katz bought the Canadian rights to the Medicine Shoppe franchise in 1991, and the following year he formed the Katz Group of Companies and opened the first Medicine Shoppe location.
Five years later, Katz bought the Rexall chain in Canada, which consisted of only a few dozen locations. Under Katz’s direction, the chains quickly grew to include 80 Rexall locations, 30 Medicine Shoppes, and a handful of independent stores. Katz later added U.S. interests to his holdings, including Drug Emporium and Snyders. Not every move was a success; the Snyders chain eventually declared bankruptcy. The Rexall group was a winner for Katz, though. At its peak, the Katz Group held a network of over 900 Rexall outlets.
A Shift in Focus
The drugstore business has served Katz well. Canadian Business Magazine lists him as Canada’s 14th richest person, with a net worth of $4.14 billion. However, in recent years Katz’s interests have expanded. He bought the Edmonton Oilers hockey team and formed the Oilers Entertainment Group, which has also developed an arena and begun to work in the film industry.
A Changing Industry
Along with the shift in his own attention, Katz was aware of changes in the drug industry. Mega-companies like McKesson were handling the entire pharmaceutical vertical, from manufacturing to retail. Katz wasn’t interested in expanding into the areas of manufacturing or distribution, so selling his retail chain to McKesson made perfect sense in this environment.
The Rexall company is still managed by the same team who managed it when Katz owned it, so the change in ownership hasn’t been felt at the store level yet. Meanshile, the sale has freed up both cash and time for Katz to focus on his sports and entertainment ventures.