Unichem in talks to bid for Lloyds Chemists

DAVID HELLIER

Unichem, the pharmaceutical wholesaler and retailer, has made an approach that is expected to lead to a near-pounds 500m takeover bid for its rival, Lloyds Chemists.

The two companies are believed to have been in talks for several days and a deal is said to be close to being finalised. In the past few days there has been persistent takeover speculation surrounding the future of Lloyds Chemists and last night the shares climbed 16p to 291p on rumours that a bid was close to being announced.

Lloyds Chemists' shares rose a further 75p yesterday to 366p after the company said it had received a bid approach. It made no comment as to who had made the approach.

Asda and Boots, the two retail companies, both said yesterday they were not in talks. Unichem declined to comment.

Shares in Unichem were 10p down on the expectation that there would be a rights issue. Analysts close to the company, however, said this was not going to be the case. If the deal went ahead it would be a cash-and- shares offer, they said, but there would be no rights issue.

Any formal offer is widely expected to have to be vetted by the Office of Fair Trading. Unichem is a large wholesale pharmaceutical distributor and in the past few years it has also been building up its retail arm.

The two companies both came up against a Monopolies Commission inquiry when they bid for another rival company, Macarthy, four years ago. In the end both bids were cleared and Lloyds Chemists won with a pounds 92.5m agreed bid after Unichem dropped out of the running.

Lloyds Chemists is already a significant retail pharmacist - it has 935 chemists stores and 369 Holland and Barrett health food outlets, as well as the Supersave drugstore chain - but it is smaller in the wholesale pharmacy business.

Last spring Lloyds Chemists endured a series of problems that were widely perceived to have left the company vulnerable to a bid approach.

In March last year NatWest Securities, a joint broker with Panmure Gordon, resigned shortly after a decision by the company to close 100 of its Supersave stores. The company's shares took a heavy fall when it was made clear that the closure would result in pounds 13.4m of restructuring costs.

In June Peter Lloyd, who helped his brother Allen to build up the company, resigned as chief executive because of ill-health. Allen Lloyd said at the time that his brother had become ill through stress after the decision to reorganise the company's loss-making drugstore business.

During the Christmas period there were further stories that Allen Lloyd was also ill but these were denied by the company and its advisers.

Allen Lloyd, who founded the group in 1973 with a single pharmacy, is a collector of cars and enjoys racing Jaguars. The Lloyd family holds around 10 per cent of the shares and therefore could recieve around pounds 50m if a deal went through at the anticipated price.

Lloyds Chemists was hoping last night to make a further statement later in the week.

Unichem had turnover of pounds 695m last year, from which it earned pre-tax profits of pounds 21.7m. Its profits performance last year was knocked by teething problems with a new computer system.