Revco agrees to purchase 1,200-store Hook-SupeRx

April 05, 1994|By Bloomberg Business News

TWINSBURG, Ohio -- Revco D.S. Inc. agreed to buy Hook-SupeRx for $13.75 a share, or about $600 million, which will make it the country's second-largest retail drugstore chain.

The price is 50 percent more than where Hook-SupeRx shares closed at the end of last week, and news of the acquisition pushed up the share price almost 40 percent in heavy trading yesterday.

Revco's planned purchase of Hook-SupeRx is the latest consolidation among retail drug chains. Just last week, Kmart Corp. completed the sale of its PayLess Drug Store chain to TCH Corp., the owner of Thrifty Drug Stores.

The 1,200 stores run by Cincinnati-based Hook-SupeRx will boost Revco's total to almost 2,400. Geographically, Revco will expand to 22 states from the nine Eastern states where it now operates.

"It's a good match," said Phil Muldoon, an analyst with McDonald & Co. Investments in Cleveland. "There's not that much overlap in terms of market."

The transaction will bolster Revco's annual revenue to about $4.7 billion, more than double the $2.2 billion it reported for fiscal 1993,which ended May 31.

"Obviously, one company that has nearly $5 billion in sales has a lot more wherewithal," Mr. Muldoon said.

Revco, based in Twinsburg, said its strategy is both to increase market penetration in the nine states where it already operates and to push into new territory.

"Hook's, SupeRx and Brooks stores are similar to ours in size, average volume and merchandise," said D. Dwayne Hoven, Revco president and chief executive.

Shareholders who own about 49 percent of Hook-SupeRx shares outstanding agreed to vote in favor of the transaction, which also includes assumption of Hook-SupeRx's debt.

Hook-SupeRx shares closed up $3.625, or 40 percent, at $12.75, in very heavy trading. Revco's shares closed down 62.5 cents, at $15.75.

Revco said it is evaluating a definitive financing package but has received both a debt financing commitment from Banque Paribas and Continental Bank and a standby purchase commitment from a contemplated equity rights offering.

The transaction is subject to Revco raising as much as $175 million through the sale of senior subordinated debentures. The acquisition is expected to close in early summer.

With the takeover of Hook-SupeRx, Revco will be second only to Rite Aid, the largest U.S. drug retailer, which has about 2,600 stores.

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