Listed Life Pharmacy Ltd is undergoing a major change, which it says will play a significant role in shaping the New Zealand pharmacy industry.
The company is planning to merge with Pharmacybrands Ltd (PBL), which has the Amcal and Unichem brands, by making an offer for 100% of its ordinary shares.
Life Pharmacy is 50.01% owned by Gulliver's Travel founder Andrew Bagnall.
The deal will be completed by a share swap, offering PBL shareholders the opportunity to sell their shares and receive Life Pharmacy shares in exchange.
PBL shareholders who accept the offer will receive nearly 40 Life Pharmacy shares for every PBL share, valuing PBL at about $20 million, or $19.55 a share.
Life Pharmacy is valued at about $36.2 million.
Life Pharmacy also announced that chairwoman Liz Coutts had resigned from the position and the board.
Peter Merton will be appointed chairman following the merger.
Mr Merton owns 66.1% of PBL.
He and Mr Bagnall are expected to both end up with a stake of 26% in the merged business.
Ms Coutts has been chairman for five years.
The merged businesses would result in 30 partly owned pharmacies and 220 franchised pharmacies in most towns and cities in New Zealand.
ABN Amro Craigs broker Chris Timms said the consolidation was timely and clean.
Before the merger, Life Pharmacy would buy back $4.2 million of its partly paid shares and undertake a 1:100 taxable bonus issue to use up imputation credits.
"From a business point of view, this makes complete sense."
Life Pharmacy would be in a stronger position, would gain better profitability and have more buying power.
The shares were being issued at a premium to the market, showing confidence.
There were several crossovers that could be eliminated by the merger, he said.
The merger would give Life Pharmacy the ability to strip out overheads.
It was likely a single management structure could look after all stores.
"This is going to be a big entity but the standardisation of management should see a cost benefit."
Life Pharmacy usually expanded on a business-by-business basis.
This was the first time it had gone for a "lump transaction", Mr Timms said.
At a glance
• Life Pharmacy Ltd is New Zealand's only listed retail pharmacy group and is made up of Life Pharmacy, Life Metro, Life Outlet and Care Chemist brands.
• It has 50 retail outlets operating throughout New Zealand.
• The merged company will have 250 outlets and franchises.
