The Pharmaceutical Journal
Vol 268 No 7188 p311-320
9 March 2002

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GEHE backs out of Irish takeover

GEHE has pulled out of a deal to buy the Irish 30-pharmacy Unicare chain for €152.4m (£94m) because of the Irish government's decision to deregulate pharmacy businesses. Now a legal battle is in prospect, with Unicare planning an Irish High Court action in a bid to force the German group to complete the deal.

GEHE's second thoughts about the purchase have been prompted by the belief that the expected cash flows from the Unicare outlets will fall sharply because of deregulation; there have been reports that it had attempted to renegotiate the purchase price.

Last month, GEHE's retail pharmacy managing director Michael Ward described the liberalisation of the Irish market as "unfortunate". The group has claimed that the changed circumstances make it impossible for the vendors to deliver what has been contracted.

The statement blamed the government's decision for an unsatisfactory and frustrating situation and claimed it made the acquisition deal, agreed last October, unimplementable.

But Unicare, a chain of community pharmacies in the Dublin area, insisted that the contracts agreed with GEHE provided for the possibility of deregulation being introduced. It said in a statement that it had initiated High Court proceedings to enforce what it called contractual entitlements, and added: "Unicare regrets that it has been necessary to issue these proceedings but is confident of a successful outcome."

GEHE responded that it will "vigorously defend any legal action".

Seven Unicare directors, headed by chief executive Fergus Hoban, stood become millionaires had the deal gone through. There was to be an upfront payment of €127m for the chain, plus earn-out payments of €25.4m.

GEHE moved into the Irish pharmacy market just over a year ago and has already acquired 17 outlets. A spokesman said those deals were not threatened. The group also owns Cahill May Roberts, the second largest pharmaceutical wholesaler in the Irish Republic, giving it a very strong position in the market.

Meanwhile, with outside groups no longer required to buy in to the Irish trade, there is speculation that Superdrug could soon follow Boots across the Irish Sea.