RELIABLE DRUG STORES' PURCHASE OF 221 REVCO OUTLETS TRIPLES
RELIABLE DRUG STORES' PURCHASE OF 221 REVCO OUTLETS TRIPLES the size of the Indianapolis-based retail drug store chain and moves the mid-western operation into four additional states -- Michigan, Tennessee, Kansas and Missouri. Reliable announced on April 27 its definitive agreement with Twinsburg, Ohio-based Revco D.S. to acquire 221 Revco outlets in eight midwestern states -- Illinois, Iowa, Indiana, Kansas, Kentucky, Michigan, Missouri and western Tennessee -- with sales volume totaling $346 mil. Reliable currently operates 112 drug stores in Illinois, Iowa, Kentucky and Indiana. The chain was formed last August following the acquisition of 112 Peoples drug stores from the Canadian company Imasco Limited ("The Pink Sheet" Jan. 23, 1989, T&G-14). That acquisition was led by Acadia Partners, Roger Grass and Charles Conaway. Grass is now Reliable Drug Stores' exec VP and Conaway its chief operating officer. The deal's "major attraction," according to Grass, is greater geographic market share. The addition of 221 (missing text) of number of stores, according to Reliable. The chain estimates that the combined 333 stores will generate annual sales "in excess of $500 mil." The Revco outlets are being divested as part of the firm's plan to downsize by 712 stores. The plan was announced earlier this year ("The Pink Sheet" Jan. 29, T&G-12) as a preliminary to the filing of a reorganization plan with Akron federal bankruptcy court on Feb. 28. Lazard Freres & Company is acting as Revco's investment banker for the divestitures. The deal, which is expected to close in June pending bankruptcy court approval, still leaves Revco with significant numbers of outlets in two states. The chain operates some 268 stores in North Carolina and approximately 196 Texas drug stores. Texas is one area the firm intends to jettison as part of its downsizing. Purchase price for the acquisition by Reliable was not disclosed. The deal was made through Reliable Holdings, which was formed by the venture capital firm Acadia Partners L.P. and the management of Reliable Drug Stores. Acadia's principal partners include the Robert M. Bass Group. The Ft. Worth, Texas Bass family made an unsolicited $925 mil. offer for all of Revco last October but apparently has settled for just a large chunk of the chain. Highlighting Reliable's debt reduction focus, Grass noted that in the six months following the acquisition of the 112 outlets from Imasco, Reliable cut its net debt outstanding by more than half, from $55 mil. to $21.5 mil. He predicted a smooth transition in ownership, noting that Reliable has "significant excess capacity" at its Indianapolis distribution center and the administrative infrastructure to handle a greatly expanded operation.
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