UniChem reiterated its claim that the merger of the businesses would lead to "material earnings enhancement" after the first year. Lord Rippon, the chairman, said annual cost savings would run at over pounds 15m in the first 12 months and in excess of pounds 20m thereafter. The enlarged group would create a UK leader in pharmacy retailing, the distribution of prescription drugs to independent chemists and the wholesaling of veterinary products.
But Gehe, which is mounting a rival pounds 651m bid for Lloyds, countered that gearing would soar to nearly 490 per cent if the two businesses were put together. The figures were based on UniChem's average debt level of pounds 128m for last year, a spokesman for the German group said, and were before estimated restructuring and certain bid costs. That level of debt will leave the group vulnerable, he claimed. "We think this is something to be questioned, particularly as at the time of the last rights issue in 1994 [Lloyds] said it wanted to cut gearing, then standing at 36 per cent."
However, in an immediate riposte, Jeffery Harris, the UniChem chief executive, said Gehe was trotting out all the same old themes. "Contrary to all Gehe's earlier protestations of the diminishing value of Lloyds, their bid of pounds 5 underlines the value we have put on the company. We are confident of delivering value to shareholders from the acquisition."