Firings start at acquired firm's ex-HQ in Baltimore

Omnicare reportedly has cut 50 jobs from 500 at NeighborCare's home base

Some terminated workers were offered severance

August 23, 2005|By M. William Salganik | M. William Salganik,SUN STAFF

Beginning its consolidation, Omnicare Inc. yesterday eliminated the jobs of about 50 people at the headquarters of NeighborCare, the Baltimore company it bought last month, a source confirmed.

The company declined to comment about dismissals or about its plans for the remaining 450 people at NeighborCare headquarters.

"It is Omnicare's policy not to comment on specific employee matters related to the consolidation of Omnicare and NeighborCare's operations," a spokesman for the Kentucky-based parent company said. "That said, we remain encouraged by the opportunities we see to bring the best of both NeighborCare and Omnicare together to create a really superior company for the benefit of our customers."

Several NeighborCare employees, in an impromptu wake after work at the Hard Rock CafM-i in the Power Plant - an Inner Harbor building complex where NeighborCare has part of its headquarters operation - confirmed they had been notified of the terminations but declined to discuss them further.

Those given notice yesterday were offered severance, the source said.

Analysts and industry experts have predicted that Omnicare will eliminate most or all of NeighborCare's headquarters positions.

The company has not been specific about its plans, but Omnicare's chief executive officer, Joel F. Germunder, said earlier this month the purchaser would "eliminate certain functional redundancies" as it absorbed NeighborCare after the $1.9 billion acquisition.

Overall, Germunder told analysts in a conference call, Omnicare expected to save $125 million to $140 million in 2006, half from consolidation of jobs and facilities and the other half through greater purchasing power for medications.

Most of NeighborCare's 6,000 employees work at institutional pharmacies - large facilities that fill prescriptions for residents of nursing homes - in 37 states. Omnicare has its own pharmacies as well. Germunder said it would take some time to determine which of the pharmacies could be closed or combined. Most of the consolidation would take place during 2006, he said.

In the same call, Germunder said NeighborCare's chief operating officer, Robert A. Smith, would remain with the combined company, but he didn't discuss any other executives.

According to a NeighborCare filing with the Securities and Exchange Commission last month, just before the deal closed, NeighborCare executives and directors stand to collect as much as $38 million in severance and stock-option cash-outs.

John J. Arlotta, NeighborCare's chairman, president and chief executive officer, would collect $3.6 million in severance if he isn't retained by Omnicare. He also got $14.8 million for his NeighborCare stock options, according to the filing - a payment to be made regardless of whether he stayed on with the combined company.

NeighborCare began in Baltimore in 1980 as a single retail pharmacy. While it still maintains retail operations, it began to specialize in the institutional pharmacy business. It was acquired by a Pennsylvania nursing home chain, then split off as a separate, publicly traded company in December 2003.

Besides its Power Plant headquarters offices, NeighborCare has headquarters operations in two other offices near the Inner Harbor.

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