Inside This Issue - News
Drug Fair to sell the bulk of its stores
April 6th, 2009
SOMERSET, N.J. – Drug Fair Group Inc. has filed for Chapter 11 bankruptcy protection and plans to sell most of its stores to Walgreen Co.
Under the terms of a reorganization plan filed last month in U.S. Bankruptcy Court for the District of Delaware, Drug Fair has agreed to sell 32 of its stores to Walgreens. All of Drug Fair’s units are in New Jersey, and Walgreens said it may close some of the stores.
The proposed transaction, terms of which were not disclosed, remains subject to the marketing requirements of the U.S. Bankruptcy Code and the approval of the court.
The deal with Walgreens comes on the heels of an earlier agreement between Drug Fair and the Deerfield, Ill.-based chain to acquire the prescription files from 11 Drug Fair stores.
At the time of the Chapter 11 filing, Drug Fair Group had 42 Drug Fair retail pharmacy stores, 12 Cost Cutter general merchandise stores and two unopened Drug Fair locations that were being built out, says Tim Boates, the company’s chief restructuring officer.
The company also plans to phase out pharmacies it operated in four Food Circus/Foodtown supermarkets, Boates says.
The proposed sale to Walgreens includes the two unopened Drug Fair units and three Cost Cutters stores, he says.
“After exploring alternatives following a thorough consultation with its legal and financial advisers, Drug Fair’s board of directors determined that an orderly sale of the company’s assets through a Chapter 11 process, together with those assets sold prior to the Chapter 11 filing, would be the most prudent and effective way to maximize value for Drug Fair’s stakeholders,” Boates said in a statement. “We have worked very hard to structure a transaction that is in the best interest of all parties, including our employees and the communities they serve.”
As part of the bankruptcy filing, Drug Fair has arranged a $40 million, four-month secured debtor-in-possession financing facility to keep it going while it reorganizes.
Walgreens executives say they will continue to provide shoppers with the same level of service that they had come to expect from Drug Fair during its 55 years in business.
“Drug Fair has been a respected pharmacy in this region for more than 50 years,” says Tim Anhorn, Walgreens’ vice president for the Northeast market. “We’re pleased to be able to keep most of the stores open and continue providing these communities with convenient access to high-quality pharmacy services and basic needs.”
Drug Fair’s plunge into bankruptcy comes nearly four years after the drug chain was acquired by the private equity group Sun Capital Partners.
According to reports in several New Jersey newspapers, Sun Capital’s decision to file for Chapter 11 protection came as a shock to shoppers and Drug Fair employees. Nearly 50 employees at the chain’s headquarters here were abruptly fired in mid-March, and the company began closing pharmacies without notice, according to the reports.
“These challenging economic times have affected all of our families, our friends and our patients in some manner,” Drug Fair chief executive officer Tim LaBeau wrote in a memo distributed to employees the day that the deal with Walgreens was announced.
Walgreens’ acquisition of the Drug Fair stores is the company’s latest move to strengthen its position in a number of markets across the country. Most recently, in February, the company bought 12 stores in San Francisco and Idaho from Rite Aid Corp.