FamilyMeds and DrugMax to Merge

Farmington, CT-based pharmacy chain Familymeds Group announced on March 22 that it plans to merge with $292 million wholesaler DrugMax in a stock swap valued at more than $50 million.

The deal would create a combined corporation with annual revenue in excess of $500 million. The deal Familymeds reported revenue of $219 million for the year ended Dec. 27. Clearwater, FL-based DrugMax, a wholesale distributor of prescription pharmaceuticals, over-the-counter products, medical supplies and nutritional supplements, reported revenue of $292 million for the fiscal year ended March 31.

The merger, which is subject to approval by shareholders of both companies, already has the blessing of the board of directors of both companies; shareholders are expected to vote on the deal in June. The deal would give Familymeds’ retail pharmacies, Website and catalog operations better access to wholesale drugs and medical products, while providing retail outlets for DrugMax. What’s more, the transaction would enable privately held Familymeds to become a publicly traded firm without the expense of an initial public stock offering.

If the merger goes through, Familymeds’ founder/president/CEOEd Mercadante will take over as co-chairman/CEO of the combined company. DrugMax’s chairman/CEO Jugal Taneja, would be the other co-chairman. The private owners of Familymeds will wind up with 62% of the stock in the combined company. Investors in Familymeds include a variety of venture capital and private equity investors, such as ABS Capital Partners, HLM Venture Partners, Zesiger Capital Group and Conning Capital Partners.

It’s not yet clear how the merger will affect Familymeds catalog business. The company purchased healthcare products cataloger InteliHealth from insurance company Aetna in January 2003. Terms of the deal were not disclosed, but the transaction included the 415,000-name customer list, the inventory, and the creative assets of the InteliHealth catalog and Website.

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