Chemist shops on line for listing

Tim Roper

The sharemarket is set to get its first listed pharmacy group after Beauty Direct shareholders yesterday gave the all-clear to a deal to buy the Life Pharmacy chain.

But while the dozen or so Beauty Direct shareholders who attended a special meeting in Auckland ultimately supported the plan, directors in both companies were first subjected to a grilling by one shareholder over the terms of the deal.

Beauty Direct plans to issue up to 593 million new shares at 6.5c each to buy a 49 per cent stake in 18 of the 21 pharmacies which operate under the Life banner as well as the Life Pharmacy franchise brand and business.

Because of the ownership change, the stores must get new pharmacy licences before the $38.5 million deal is final, but it is expected to have jumped all remaining hurdles by February 23. Once that happens Beauty Direct shareholders will own just 4.5 per cent of the company, to be renamed Life Pharmacy.

Beauty Direct shareholder and pharmacist Warren Flaunty said he believed the price was far too rich in the light of recent sale prices for pharmacies.

"I'm in favour of this, but I do think it is very, very generous," he said.

He also questioned whether incoming chairwoman Liz Coutts, a director of Ebos and Skellmax, would have a conflict of interest given that Ebos was a major distributor of products sold in pharmacies.

Coutts said she had spoken at length on that subject with the boards of Ebos and Life Pharmacy. "We do not believe that there is any conflict that cannot be managed," she said.

Life Pharmacy chief executive Tim Roper said an independent report had found the deal fair to Beauty Direct shareholders. Roper, who will head the combined company, said the price paid reflected a price-to-equity ratio of about 14 times based on 2006 earnings, normal among listed retail stocks.

"You have to remember the pharmacist-owners are receiving shares, not cash," he told Flaunty.

After the meeting, Flaunty said he had supported the plan despite his misgivings because he thought without it Beauty Direct shares were headed for the "bottom drawer".

That future appeared distant yesterday as shareholders were given a taste of the company's expansion plans. Roper said the new board would meet to formally discuss strategy next week, but planned to increase the number of stores through acquisitions and establishing operations on new sites in Albany, Britomart and Sylvia Park.

It would also look at establishing a second chain once the Life Pharmacy brand supported about 30 stores.

"It is likely we will need to develop another brand and be involved with acquiring other pharmacies that meet those requirements," he said.

Beauty Direct Shareholders also got their first taste of life under the new Life regime - a Valentine's Day gift pack for those who had forgotten something for their sweetheart.