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This article was originally published in The Tan Sheet

Executive Summary

THRIFTY PARENT TCH ACQUIRING PAYLESS FROM KMART and will combine PayLess with its Thrifty Drug and Bi-Mart operations, the firms announced Dec. 2. The deal is valued at over $ 1 bil., consisting of $ 592 mil. in cash; assumption or refinancing of approximately $ 170 mil. of debt; $ 100 mil. in subordinated debt securities; and common stock representing 47% of the equity of TCH, Kmart said. The transaction, expected to be complete by the end of February, is subject to receipt of financing and must clear Hart-Scott-Rodino federal anti-trust provisions. The TCH shareholders will hold 53% of the equity of the combined entity. Sales of the combined companies are expected to reach $ 4.7 bil. in 1994. Wilsonville, Ore.-based PayLess Drug Stores Northwest operates 572 stores in 12 states. It was purchased by Kmart in 1985. TCH Corp. is a privately held corporation controlled by an investment partnership managed by Leonard Green & Partners, an investment banking firm that specializes in management buyouts. TCH acquired Los Angeles-based Thrifty Corp. in September 1992. Thrifty has 494 stores in California. TCH also owns Bi-Mart Corp., a 41-store membership discount drug and general merchandise chain headquartered in Eugene, Ore.; Denver, Colo.-based Gart Bros. Sporting Goods; and MC Sporting Goods, located in the Midwest. Gart Bros. and MC Sporting Goods are not affected by the acquisition. Kmart anticipates that it will complete its valuation of the TCH equity by the end of the year. "Based upon preliminary estimates using conservative valuation assumptions, an after-tax charge of approximately $ 100 mil. could be incurred," Kmart said.

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