Revco Starts Hostile Bid for Big B; Two Other Retailers to Combine
Revco D.S. Inc., one of the country’s biggest drugstore chains, began a $330-million hostile takeover bid Monday for Big B Inc., a Southern competitor. Meanwhile, two smaller retailers announced a friendly merger.
ShopKo Stores Inc., a Green Bay, Wis.-based discount merchandiser, and Phar-Mor Inc., a drug chain based in Youngstown, Ohio, said they will combine under a new holding company.
The moves underscore the increasingly competitive environment in drug retailing. Companies are trying to expand their markets and cut expenses as their profits are squeezed by health maintenance organizations.
Revco’s bid is its first major strategic move since April, when Rite Aid Corp., the No. 1 U.S. drug retailer, abandoned its buyout plans for Revco amid opposition from government regulators who feared it would dominate too many markets. Revco remains the No. 2 drug retailer, with 2,184 stores in the Midwest, Southeast and East and $4.5 billion in annual revenue. The company doubled its size in 1994 by buying Hook SupeRx Inc. two years after emerging from a four-year bankruptcy reorganization.
Big B, based near Birmingham, Ala., has 397 stores in five Southern states and about $750 million in annual revenue.
Revco, which already owns 5.4% of Big B, is offering $15 a share in cash for the rest, a nearly 19% premium over its closing price last week. Analysts said Big B management resisted a friendly buyout offer of $14 a share. Big B Chairman and Chief Executive Anthony Bruno said directors are considering the offer and advised shareholders to wait.
Big B’s shares rose $3.25 to $15.875 on Nasdaq on Monday. Revco shares gained 12.5 cents to $25.75 on the New York Stock Exchange.
Phar-Mor lost 75 cents to close at $7.375 on Nasdaq; ShopKo fell 12.5 cents to $16.125 on the NYSE.
ShopKo and Phar-Mor said they would merge under a holding company to be called Cabot Noble Inc., which would swap its newly issued stock for the shares of the existing companies. The deal values ShopKo at about $552 million to $576 million.
