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Executive Summary

KETCHUM SALES PROJECTED AT $ 341 MIL. IN FY 1991 FOLLOWING MERGER with the French firm Office Commercial Pharmaceutique International (OCPI) that was approved by shareholders on June 28. The projection, made in a June 1 notice of the special meeting, assumes that the drug and H&BA wholesale distributor loses no major customers during the year ending Sept. 30 and effects an "aggressive increase" in net sales. In fiscal 1990, South Plainfield, N.J.-based Ketchum posted a loss of $ 2.6 mil. on sales of $ 286 mil. The latest projections post a 19.2% sales increase for the 12-month period. For fiscal 1992, the company is forecasting a 14.9% increase in revenues to $ 392 mil. The special notice predicts that income before taxes for the current and next fiscal years will be $ 1.5 mil. and $ 4 mil., respectively. Ketchum will be operated as a privately-held, wholly-owned subsidiary of OCPI, which also will convert $ 9.5 mil. of Ketchum debt to equity. OCPI has owned over 50% of Ketchum since October 1987 and has controlled the two-thirds necessary to approve a merger since August. The decision now to make Ketchum a subsidiary followed unsuccessful sales negotiations with four other entities between June 1988 and May 1990, the notice states. OCPI decided to take Ketchum private, the prospectus says, "to enable the company to react more readily to market conditions," to enable OCPI "to manage its operations more effectively and efficiently," and to "eliminate or reduce the expense and costs" of public operation of Ketchum. The merger does not preclude a subsequent transaction, the notice says. After the merger "the company will be able more readily to investigate, react to and conclude possible combinations of the company and third parties." The OCPI/Ketchum merger agreement was announced in May, at which time Ketchum projected substantially lower sales and a $ 2.6 mil. loss for fiscal 1991. However, a strong first quarter led the company to revise its estimates, the notice says. As a result of the revised figures, the company raised the consideration to be paid to shareholders from $ 2.25 per share to $ 2.425 per share. The initial $ 2.25 figure prompted a lawsuit from one of the Ketchum's shareholders, William Glosser, who alleged that the figure was "a grossly unfair price," the notice says. Glosser alleged that the merger was "timed to coincide with a temporary downturn in the market value of the company's common stock," Ketchum said, and that members of an independent committee selected to evaluate the offer were "too old to assert themselves" against the company. However, the charges were dismissed on May 17. Ketchum's major customers include Genovese Drug Stores, which accounted for 13.3% of FY 1990 sales (about $ 38 mil.). The Legend Cooperative, a nationwide pharmacy buying group, accounted for 10.2% of FY 1990 sales (about $ 29 mil.). All told, the company "services approximately 1,250 active customer accounts," Ketchum said. Ketchum distributes merchandise for about 800 suppliers. The company's largest pharmaceutical suppliers are Lilly, Roche, SmithKline Beecham, Merck and Pfizer.

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