Life Pharmacy planning merger

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JOINING FORCES: Life Pharmacy has entered into a merger agreement with Pharmacybrands.

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Two key players in the pharmacy industry plan to merge, in the face of growing competition from other retailers and grocery traders.

Listed retail group Life Pharmacy today announced it had entered into a merger agreement with Pharmacybrands, under which Life will make an offer for 100 percent of the ordinary shares of Pharmacybrands, merging the operations of the two companies.

Life was offering Pharmacybrands shareholders the opportunity to sell their shares and receive Life shares in exchange.

Pharmacybrands shareholders would receive 39.783 Life shares for every Pharmacybrands share.

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

The shares to be issued under the offer will have an issue price of 49.1c.

The offer was recommended by the Pharmacybrands board, Life said.

Holders of 68.9 percent of the shares in Pharmacybrands had signed pre-bid agreements to accept the offer, when made in respect of all of their Pharmacybrands shares.

Those shareholders were Cape Healthcare -- holder of 66.1 percent of the shares in Pharmacybrands and associated with director Peter Merton -- and Pharmacybrands directors Peter McSweeney, Ken Orr, Graham Gyde, Steve Tatton and Ian Sharp.

As part of the transaction, and before the share swap offer, Life would buy back $4.2m of its partly paid shares.

Immediately before the merger Life would also be undertaking a 1:100 taxable bonus issue to use up imputation credits, Life said.

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

Operations would range from community pharmacies to high end retail outlets with exclusive ranges of fashion and beauty products.

"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 shares were up 6c in early trade to 42c, having ranged between 46c and 33c in the past year.

NZPA