NEW YORK -- The big continue to get bigger in the chain drugstore industry, at the expense of smaller regional chains.
Late last year, Thrifty Corp. of Los Angeles merged with PayLess Drug Stores of Wilsonville, Ore., while Longs Drug in Walnut Creek, Calif., purchased nearby Bill's Drug of Benicia, Calif.
The latest candidate for consolidation is the nearly 1,200-store Hook-SupeRx Inc., based in Cincinnati.
Revco D.S. of Twinsburg, Ohio, has entered into a definitive merger agreement to acquire HSI for $600 million, according to an announcement on Monday. The deal would include HSI's assumed debt of $300 million.
HSI operates drugstores under the Hook Drug, Brooks and SupeRx names. The three combined to produce sales of $2.3 billion in the last 12 months.
With the addition of HSI, Revco's store count will soar to 2,371 -- almost double its current base of 1,213 -- and sales will reach $4.7 billion.
That would place Revco in a tie with PayLess/Thrifty as the nation's second-largest drug chain in volume, if the merger is completed in the next few months.
Walgreen Co., based in Deerfield, Ill., remains the market leader, with 1993 sales of $8.3 billion. Ironically, Revco emerged from Chapter 11 only two years ago.
Since then, Revco has chalked up seven quarters of larger-than-expected earnings, and the chain had net income of $14.2 million on sales of $2.2 billion in 1993. Although many industry experts expressed surprise that Revco would tackle such a huge acquisition at this time, most executives were impressed with the chain's rapid turnaround.
"I've seen some of their new stores and they are really quite impressive," said Gerald Heller, president and chief executive officer of May's Drug Stores of Tulsa, Okla. One dramatic step Revco has taken was to improve the cosmetics presentation in its new stores. Although the chain remains primarily self-service in beauty, it acted quickly to add more fashionable items, such as salon nail products and skin care, over the past two years. Last year, Revco added prestige fragrances for the first time, a move that paid off during Christmas, according to buyer Judy Wray.The average Revco unit produces sales of $1.85 million; HSI stores average $1.9 million. Each is estimated to produce only 4 to 5 percent of total sales in cosmetics, a percentage that is expected to grow as Revco continues to place a greater emphasis on the category.
"HSI is a excellent fit for Revco," said D. Dwayne Hoven, Revco president and chief executive officer."Hook, SupeRx and Brooks store are similar to ours in size, average volume and merchandise."
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