MerryMart stock suspended after it completes purchase of Carlos Superdrug
MerryMart [MM 3.24 0.61%] disclosed that it signed the final documents to purchase a 75% majority stake in Carlos Superdrug for P340 million. Carlos Superdrug is a Quezon Province-based pharmacy chain with 27 stores; MM said that those stores will count towards MM’s 100-store network goal by the end of 2021.
The PSE indicated that this transaction falls under the “Substantial Acquisition Rule”, and said that MM would be immediately suspended from trading until it is able to comply with the rule’s “comprehensive disclosure requirement”.
MB BOTTOM-LINE
The original intention of the parties was for MM to obtain a 67% post-investment stake in Carlos, but it looks like something must have come up during the due diligence process that either caused MM to re-value the company slightly lower (selling shareholders give up more company for the same amount of total money), or the Carlos selling shareholders to want to part with more shares.
Since the purchase price was not made public back in July when the deal was announced, we probably can’t know for certain, though my hunch is that it’s more likely that valuations were slightly adjusted as the parties took a closer look at the deal. That’s pretty normal, especially in cases where the selling shareholders are founding family members and the business is a legacy family business.
It’s not clear yet whether the Carlos Superdrug stores will be re-branded as MM stores, or re-formatted to include typical MM store offerings (MB link to yesterday’s rant); more importantly, it’s also not clear yet how the “pharmacy DNA” that comes with this purchase will be integrated into the existing MM stores.
MM has not said yet whether products and services coming from Carlos Superdrug will be offered in other MM stores or through MM’s online channels, but this (to me) is the more interesting part of the deal.
Unlike Fruitas [FRUIT 1.34 0.74%] and its random purchase of a medical diagnostic company with not relation to its business model or any of its operating segments, MM’s purchase of Carlos Superdrug immediately teases interesting possibilities that could increase the profits of both the existing MM stores and the newly-acquired Carlos Superdrug stores through a sharing of products and offerings.
Carlos Superdrug’s strengths (pharmacy knowledge, store footprint) complement MM’s business, and MM’s strengths (expansion, reach) will potentially unlock a great deal of value in Carlos Superdrug’s business.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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