THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, April 18, 1996 TAG: 9604180371
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY KATHERINE RIZZO, ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 62 lines
The Federal Trade Commission voted Wednesday to file a lawsuit to block the merger of the nation's two largest drugstore chains.
Commissioners decided on a 5-0 vote that Rite Aid Corp.'s planned $1.8 billion purchase of Revco D.S. Inc. would lead to higher prices.
``Rite Aid-Revco would have significantly more pharmacy locations than its closest competition and would have the ability to increase prices and harm consumers,'' said George Cary, deputy director of the FTC's Bureau of Competition.
``If allowed to proceed, the combined Rite Aid-Revco firm would be the dominant pharmacy chain in numerous Eastern and Midwestern metropolitan areas.''
The FTC said it will file a complaint in U.S. District Court in Ohio. A companion case also was being prepared by Ohio's attorney general, said FTC spokeswoman Victoria Streitfeld.
The FTC complaint will seek an injunction preventing the purchase from completion on the grounds that it would violate antitrust laws by substantially reducing competition for prescription drugs in parts of Ohio, Indiana, Pennsylvania, Maryland, Virginia, West Virginia, North Carolina, South Carolina and New York.
Rite Aid executives were not immediately available for comment. Revco spokesman Tom Dingledy declined to comment, saying the issues are between Rite Aid and the government.
Rite Aid, based in Camp Hill, Pa., announced its planned cash and stock takeover of Twinsburg, Ohio-based Revco in November.
The purchase was designed to increase Rite Aid's competitive strength in an era when health insurers are putting severe pressure on doctors, pharmacists and other providers to reduce costs.
As part of the deal, Rite Aid offered Revco shareholders $27.50 per share in cash, but has had to extend its deadline for acceptance of the offer several times as the FTC conducted its required antitrust review.
Under that cash offer, Rite Aid hoped to acquire 50.1 percent of Revco shares, or about 35.1 million shares, giving it a controlling interest. The deal got a head start when an investment fund run by turnaround specialists Sam Zell and David Schulte agreed to sell its 19.7 percent stake in Revco.
However, in the intervening months, the cash offer has been able to attract about a third of Revco shares.
Rite Aid had asked the FTC to complete its review by Friday. The purchase terms allow both companies to walk away from the deal without penalty if it isn't completed by April 29.
If the deal is approved, Rite Aid, already the country's largest drug store chain, would have about 4,800 stores in 22 states.
It plans to shutter Revco's headquarters, eliminating about 1,100 jobs. Plans also call for the closure of about 300 stores with an undetermined number of job losses.
In midday New York Stock Exchange trading, Revco shares plunged $1.25 to $25.87 1/2, while Rite Aid, which has been lately falling from a peak of $34.50 on March 7, retreated 62 1/2 cents to $30.37 1/2 on the NYSE. by CNB