Life Pharmacy, Amcal and Unichem to merge

Photo / Brett Phibbs

Unichem, Amcal and Life Pharmacy are uniting in New Zealand in an agreed takeover to face growing competition from other retailers and grocery traders.

Listed retail group Life Pharmacy is paying 39.783 of its shares for every Pharmacybrands share. The shares will be issued at 49.1c each.

Life Pharmacy shares rose 6c to 42c in afternoon trading.

The offer is recommended by the Pharmacybrands' board and holders of 68.9 per cent of Pharmacybrands' shares have agreed to accept.

The offer values Pharmacybrands at around $20 million, or $19.55 per Pharmacybrands share, and Life Pharmacy at around $36.2 million.

The companies have taken legal advice and do not believe the acquisition needs approval from the New Zealand Commerce Commission. The combined group will have between 30 per cent and 35 per cent of the pharmacy market.

Life Pharmacy, which raised $11.2m in a rights issue last year, is using $4.2m of cash to buy its shares back before issuing new shares to buy Pharmacybrands. Life Pharmacy is also undertaking a 1:100 taxable bonus issue to use up imputation credits. Effectively it issues shares at nil value to current shareholders.

Life Pharmacy, which is 50.01 per cent owned by Gulliver's Travel founder Andrew Bagnall, looked at Pharmacybrands, which has the Amcal and Unichem brands, in April 2007. Pharmacybrands did an alternative deal with Cape Healthcare.

Today's deal is subject to shareholder approval and an independent report will be prepared by Deloitte. The notice of meeting and Deloitte report is expected to be mailed late this week or early next week for a vote at the company's annual meeting. The takeover is subject to a 50 per cent vote.

If the takeover proceeds Life Pharmacy shareholders will have about 60 per cent of the combined company and Pharmacybrands' shareholders will have about 40 per cent.

Bagnall's shareholding in the combined group will be around 26 per cent to 27 per cent, depending on how many shares are bought back. Mr Peter Merton, who is associated with Cape Healthcare and owns 66.1 per cent of Pharmacybrands, is expected to end up with a similar-sized stake.

The combined group competes with independent owned pharmacies, Radius Pharmacies, and smaller buying groups as well as retailers.

Life Pharmacy listed in 2004 and made losses for several years.

Pharmacists have to own 51 per cent of pharmacies and many of Life Pharmacies' shareholders are pharmacists.

The merged business will have around 30 partly owned pharmacies, 220 franchised pharmacies and a presence in most towns and cities.

"The Life board believes that the pharmacy industry needs strong ownership structures, particularly as competition continues to build from other retailers and grocery traders," Life said.

Life Pharmacy chairwoman Liz Coutts has stepped down and resigned from the board of the company.

- NZPA