Aug 2010 Financial News

A new dimension to the drug store business

Aug 18, 2010

Smith Robertson and Co and SuperPharm--which operates drug and convenience stores at Westmoorings, Chaguanas, Valsayn, Gulf View and Tunapuna-- have become subsidiaries of the Agostini's Group.

In return, previous owners of the companies-- Victor E Mouttet Ltd-- acquired $285 million worth of Agostini's stock which gave the company a 50.4 per cent interest in Agostini's Ltd.

Established around 1925 by Johnnie Agostini as a company that sold socks and soya beans, Agostini's today has evolved into a publicly traded company that distributes food, pharmaceuticals, lighting, household items, printing, hydraulic and oilfield products as well as tools and building materials.

It is also involved in the home construction business.

For its nine-month financial period ended June 30, the group posted profit attributable to shareholders of $14.6 million, up 19 per cent from the same period a year earlier.

Agostini's chairman Joseph Esau confirmed last week that the deal involved the more than 50 per cent stock acquisition by Victor E Mouttet for transferring Smith Robertson and Co and SuperPharm into the Agostini's group.

He said SuperPharm, formed five years ago, was now in expansion mode and turning over consistent profits.

"Starting next year it plans to open three new branches," he said during a phone interview last Friday.

In terms of pharmaceutical distribution, Esau said Smith Robertson was the largest distributor in the country and Agostini's was the second largest before the acquisition.

With Smith Robertson and Co becoming a subsidiary, Agostini's has grown into the country's biggest pharmaceutical distributor.

"It gives us a compelling position for efficiency in customer service," Esau said, adding that it meant the retail sector could grow to change the way owner-operated drug stores functioned in a way that would provide better services to customers.

"It adds a new dimension to the retail sector and will provide more flexibility and a variety of services while at the same time not replacing the position of the neighbourhood drug store," Esau said.

Agostini's has had a challenging year with its construction sector experiencing reduced earnings because of less activity by housing developers, private and Government alike, Esau said.

Its United States subsidiary Mobern Lighting, has also been a drag on earnings because of the depressed US economy, he told the Business Express.

The collapse of CL Financial in 2009- which owned 30 per cent of Agostini's stock also put the company in a challenging position.

Esau said Agostini's acquired another distributor, Hand Arnold, in 2008 for $125 million in a debt financing arrangement.

The group decided to go to shareholders with initial public offering of stock to cover the Hand Arnold acquisition.

CL Financial, which owned Agostini's stock through subsidiaries CLICO and Home Construction Ltd, agreed to take up the stock offer.

But "because of events with CL Financial, it did not come up with the money and the rights issue failed", Esau explained.

Against that backdrop of improving its debt to equity position, Agostini's had to find a new investment. By that time, its options were limited as the government was already in control of its CL Financial-owned stock which had been diluted by then to 22 per cent.

"It was a vulnerable position and management had to look for an acquisition with very little debt," Esau recalled.

On that basis, the group had to expand without taking on debt.

It examined three competing projects and decided the transaction that best supported its position was the deal for SuperPharm and Smith Robertson and Co.

The transaction was also supported by the Ahamad group of companies which owned 32 per cent of Agostini's.

In his chairman's report last Friday, Esau said the boards of Smith Robertson and Co and SuperPharm had been constituted under Agostini's group structure and "we expect the results from these companies to positively impact our earnings per share for the final quarter of 2010 fiscal year".


Source:
Trinidad Express
Wednesday August 18, 2010

http://www.trinidadexpress.com/business-magazine/A_new_dimension_to_the__drug_store_business.html