Oriola-KD to acquire 171 pharmacies in Swedish auction process
9.11.2009
Oriola-KD Corporation Stock Exchange Release 9 November 2009 at 9.25
am
Kronans Droghandel Retail AB, a company jointly owned by Oriola-KD
Corporation and Kooperativa Förbundet (KF), has signed a share
purchase agreement with Apoteket AB (publ) on the acquisition of 100
per cent of the shares of Pharmacy Company Sweden 2 AB, a national
pharmacy cluster with 171 pharmacies.
Proforma net sales of the 171 pharmacies in 2008 were SEK 4.4
billion, 14.5 per cent of Swedish pharmacy market. Proforma operating
profit including average central overhead costs of Apoteket AB in
2008 was SEK 183 million, 4.2 per cent of net sales. The net debt of
the acquired pharmacy cluster at the end of August 2009 was SEK 136
million. The pharmacy cluster employed 931 employees at the end of
2008.
The total purchase price of the acquisition is expected to be
approximately SEK 1.56 billion in cash. The closing of the
transaction is expected to take place in the first quarter of 2010,
and is subject to approval by the Swedish Competition Authority
(Konkurrensverket) and the granting of pharmacy licence by the
Swedish Medical Products Agency (Läkemedelsverket).
Cooperation with Kooperativa Förbundet
In connection with the acquisition, Oriola-KD and KF have completed
the previously announced collaboration on the Swedish pharmaceutical
retail market by establishing a joint venture company, Kronans
Droghandel Retail AB. According to the shareholders' agreement,
Oriola-KD holds an 80 per cent ownership and KF 20 per cent in the
company. The Board of Directors of Kronans Droghandel Retail AB
consists of four members appointed by Oriola-KD and one member
appointed by KF. Cecilia Marlow has been appointed as Managing
Director of the company.
The joint venture enables Kronans Droghandel Retail AB to establish
new pharmacies, mainly in conjunction with Coop's hyper and
supermarkets owned by KF. Oriola-KD will be responsible for the
development and management of the pharmacy chain. The joint venture
will operate under the Kronans Droghandel brand.
Takeover of pharmacies
Oriola-KD has been preparing for the deregulated market for more than
15 months with the objective of creating a leading pharmaceutical
retail chain on the Swedish market. A new retail organisation with
the required processes and capabilities has been established in
Stockholm. The organisation is fully prepared for the take-over of
pharmacies at closing, supported by a detailed cluster take-over
plan. Oriola-KD will further develop the business operations and
expand its pharmacy chain in cooperation with KF in the long term.
Financing the acquisition
Oriola-KD and KF will finance the acquisition in part with an equity
investment of SEK 600 million into Kronans Droghandel Retail AB. In
addition to the equity financing, Kronans Droghandel Retail AB has
signed a SEK 1.3 billion credit facility with Nordea Bank Finland
plc, Pohjola Bank plc, Sampo Bank Plc and Svenska Handelsbanken AB
(publ), Branch operation in Finland, in which Nordea Bank Finland Plc
acted as the Agent.
The facility will be used for financing the acquisition, investing
into the establishment of new pharmacies and for working capital
purposes in Sweden. The credit facility includes financial covenants
based on Oriola-KD's net debt to EBITDA and gearing ratio.
Oriola-KD has started a sale of sales receivables programme
(non-recourse) in Sweden with Pohjola Bank plc to finance its equity
investment in Kronans Droghandel Retail AB. After closing of the
transaction, Oriola-KD's gearing ratio, which was 44 per cent at the
end of September 2009, is expected to increase to the level of 100
per cent.
Supporting Oriola-KD's strategy
The acquisition is in line with Oriola-KD's strategy to expand
operations from pharmaceutical wholesale to pharmaceutical retail in
all countries where Oriola-KD operates and where market regulation
allows it.
Oriola-KD's fully-owned subsidiary, Kronans Droghandel AB (KD
Pharma), has been operating on the Swedish pharmaceutical trade
market for more than 100 years. During the last 40 years the
wholesale company has made daily nationwide deliveries of
pharmaceuticals to all of Apoteket AB's pharmacies fulfilling special
requirements on quality and accuracy. The long experience in the
Swedish pharmaceutical market makes this acquisition a logical next
step for Oriola-KD to expand into the retail business. Oriola-KD
entered the Russian pharmaceutical wholesale and retail market in
2008 and is currently one of the leading pharmaceutical wholesale and
retail companies in Russia.
Deregulation of the Swedish pharmacy market
On 29 April 2009, the Swedish Parliament decided to dismantle the
country's pharmacy monopoly as of 1 July 2009. The deregulation of
the pharmacy market makes it possible for operators other than
Apoteket AB to engage in the pharmacy business in Sweden. With the
deregulation, the seller announced that 466 pharmacies would be sold
to large and medium-sized companies, while 150 pharmacies remaining
in state ownership would later be sold to small entrepreneurs.
Apoteket AB will retain ownership of 330 pharmacies. The total value
of Swedish pharmacy market in 2008 was some SEK 30.3 billion.
"The deregulation of the Swedish pharmaceutical retail market and the
acquisition of pharmacies is an important strategic step and an
excellent investment opportunity for us in Sweden. Kronans Droghandel
has been building a retail organisation since August 2008 and has
made considerable investments in preparing for this opportunity. A
pharmacy concept designed for the Swedish market, a thorough
take-over plan and a strong organisation are in place to support our
long-term strategies and goals. Based on our combined experience and
all measures taken, Kronans Droghandel is in an excellent position to
ensure an uninterrupted and secure flow of pharmaceuticals under all
circumstances in Sweden," said Eero Hautaniemi, President and CEO,
Oriola-KD Corporation, and Lars Idermark, President and CEO,
Kooperativa Förbundet.
Invitation to conference call
Oriola-KD Corporation will have a teleconference on 9 November 2009
at 4.00 pm Finnish time regarding the acquisition of pharmacies in
Sweden, tel. +358 9 69 379 735, confirmation number 2127424. The
language of the teleconference will be English.
Oriola-KD Corporation
Eero Hautaniemi
President and CEO
Kimmo Virtanen
Executive Vice President and CFO
Further information:
Eero Hautaniemi
President and CEO
tel. +358 (0)10 429 2109
e-mail: eero.hautaniemi@oriola-kd.com
Kimmo Virtanen
Executive Vice President and CFO
tel. +358 (0)10 429 2069
e-mail: kimmo.virtanen@oriola-kd.com
Pellervo Hämäläinen
Vice President, Communications and Investor Relations
tel. +358 (0)10 429 2497
e-mail: pellervo.hamalainen@oriola-kd.com
Distribution:
NASDAQ OMX Helsinki Ltd
Principal media
Published by:
Oriola-KD Corporation
Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com