Race hotting up for Co-op Pharmacies

^^^^^^^^^^^^^^^^^^^^^
THE race to buy the Co-operative Group’s chain of high street chemists is down to a fight between a rival and one of America’s biggest buyout specialists, according to reports.

The Sunday Times said Lloyds Pharmacy, owned by Celesio, a German drugs wholesaler, is thought to be battling with Carlyle, owner of the RAC breakdown service, to clinch the £600m deal.

At least two other bidders, possibly including Alliance Boots and an unnamed buyout firm, are also thought to remain in contention, the newspaper said.

Insiders have suggested that Coventry-based Lloyds would lay off hundreds of staff because many Co-op workers, such as those in the Manchester head office at Angel Square, would not be needed. However, the savings it could generate should allow it to outbid its rival.

Legal opinion is divided over whether competition rules would prevent a rival such as Lloyds or Alliance Boots from buying the Co-op pharmacies. Some argue the fragmented nature of the market should ensure a deal is acceptable to watchdogs, while others believe an acquisition would make the combined unit too dominant.

The Co-operative Group, which is being advised by investment banl Rothschild and law firm Addleshaw Goddard is expected to pick a preferred bidder in the next few weeks.

The 700 pharmacies, which employ about 6,500, have been subject to strong interest, with many private equity investors making offers. Montagu, CVC, Cinven, Terra Firma, and Charterhouse have all been mentioned as possible buyers.

Co-op is selling the business, as well as its farms, to raise cash and pay down some of its £1.4bn debt pile. Last year, it lost £2.5bn, mainly as a result of a near implosion in the Co-operative Bank.