Aging Population, Prescription Business Attact Bidders
CLEVELAND (AP) _ Texas billionaire Robert Bass may want to buy Revco D.S. Inc. for $925 million because he thinks the nation’s aging population will be spending more money in Revco drug stores, an analyst said Tuesday.
Bass leads a group of investors bidding for the privately held 1,900-store chain, which is the first big leveraged buyout to file for protection from creditors in U.S. Bankruptcy Court.
The deal would add $260 million in debt to the books of a company that was plunged into Bankruptcy Court last year because it couldn’t keep up with its existing debt payments. It went private in a $1.3 billion leveraged buyout in 1986.
Jeffrey Stein of McDonald & Co. of Cleveland said the offer reflected Revco’s prescription business, which is about 30 percent of its sales, and the increasing number of older Americans more dependent on prescription drugs.
Revco’s stores in 27 states fill 65 million prescriptions yearly.
″The company still has a strong franchise in the drugstore industry,″ said Stein.
Revco spokeswoman Diana Lueptow declined to comment on merits of the Bass bid, saying not enough information was available. She said the company technically considers it an expression of interest rather than an offer. Under Chapter 11, Revco itself has first rights until Feb. 28 to propose any reorganization plan for the company.
The bid was made in an Oct. 20 letter from Acadia Partners and the Robert M. Bass Group Inc. of Fort Worth, Texas, and made public Monday.
The $925 million figure overstates what the Bass-led group would actually put up for Revco. It would pay $150 million in cash for all stock in the reorganized company and assume responsibility for $515 million of debt on Revco’s books. It would also have the reorganized company borrow an additional $260.5 million.
The Bass organization has a policy that ″we don’t discuss any business with the news media,″ said a woman handling news inquiries at Bass offices in Fort Worth. She declined to identify herself.
Acadia Partners specializes in leveraged acquisitions and is capitalized in excess of $1.6 billion. Principal partners include the Bass group, American Express Co., Equitable Life Assurance Society of the U.S. and Shearson Lehman Hutton Inc.
Robert Bass, whose holdings were valued at $1.6 billion in the latest Forbes 400 list of wealthy individuals, has interests in real estate, finances and oil.
David Schulte, who advises Revco creditors on bankruptcy issues, and Stuart Hertzberg of Detroit, representing Revco suppliers, were unavailable for comment Tuesday.
Anac Holding Corp., parent of Revco D.S. Inc., reported a first-quarter loss Sept. 29 of $16.2 million, compared with a $27.9 million loss for the same period last year. Sales increased 2.4 percent, from $583 million to $597 million.
Revco was hampered late last year by dwindling stocks amidst supplier concerns. It is ″fully in stock and looking forward to the upcoming holiday season,″ the company saidin a preview of Revco’s second quarter, which ends in late November.
Stein said that, if bought at the right price, Revco could operate profitably because it currently operates at a profit before corporate debt payments are taken into account.