Gehe set to renew bid for Lloyds Chemists

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The Independent Online
Gehe, the German pharmaceutical wholesaler, yesterday gave the firmest indication yet that it was ready to renew its bid for Lloyds Chemists. The group and rival bidders UniChem were last month given qualified approval by the British competition authorities to go ahead with their offers, subject to the sale of most of Lloyds' wholesale depots.

Speaking in London yesterday, Karl-Gerhard Eick, Gehe's finance director, said: "We are trying to fulfil the remedies [demanded by the Department of Trade and Industry] in order to come up with the next bid. We hope this can happen faster than the deadline of 18 October. It is not only in our hands, but also those of the OFT."

Gehe must satisfy the Office of Fair Trading that it has reached heads of agreement to sell seven of Lloyds' 10 warehouses by the October deadline. Mr Eick said a "fair number" of potential buyers had come forward, most of them existing drug wholesalers in the UK.

But he warned that both the requirement to sell the operations and Lloyds' recent profit warning would affect the value of the business.

"It is strange if you have to sell a business and find buyers for a business you really don't know. We have not had time to do due diligence." The seven warehouses had a turnover of between pounds 130m and pounds 140m, on which a normal margin of around 2 per cent was expected, he said. That implies the businesses could be valued at anywhere from pounds 20m to over pounds 40m to Gehe, Mr Eick suggested, although he stressed that, given their poor recent performance, the operations would be sold for much less. Other sources have suggested they may fetch less than pounds 5m.

Last month's warning by Lloyds that second-half profits would be hit by uncertainty surrounding the bid "has to have an influence on the question of valuation", Mr Eick said, although he added that it was "not a logical consequence that that changes the bid price". Much would depend on the attitude of UniChem.

UniChem hinted strongly yesterday that it was ready to renew its bid at close to the original price. It said that, after two years of scrutiny, Lloyds' strategic value to the group remained the same. "We had always taken the view that we would have had to make disposals of wholesale depots and we factored this into our original thinking."

The group is thought to have had around 25 expressions of interest for the six warehouses it is being forced to sell by the DTI.

Gehe revealed that AAH, its British wholesale and retail operation with which Lloyds would be merged, had lifted operating profits by 48 per cent to pounds 24.5m in the six months to June.