Magazine article Drug Topics

CVS-Revco Merger Will Create $13 Billion Chain

Magazine article Drug Topics

CVS-Revco Merger Will Create $13 Billion Chain

Article excerpt

In the food chain, the big fish eat the smaller fish. Among drugstore chains, whales swallow whales.

Moby Dick himself will have to step aside and salute, now that drugstore mega-chain CVS is gulping down fellow mega-chain Revco D.S. in a stock transaction worth $2.8 billion. As part of the deal, CVS will assume Revco's debt load of $900 million. CVS said it expects the merger to be completed by the middle of 1997.

The combination of CVS, Woonsocket, R.I., and Revco D.S., Twinsburg, Ohio, will result in a chain of about 4,Q00 drugstores in 24 states plus the District of Columbia. CVS said the merged chain's drugstores would lead the market in the Northeast, Middle Atlantic, Southeast, and Midwest regions. There are four states in which both CVS and Revco currently have stores: New Jersey, New York, Pennsylvania, and Virginia. Industry observers suggested that the merged chain may have to divest a number of stores in these states, especially in parts of Virginia. Meanwhile, however, CVS said that after the merger is complete, it will continue to add new stores at a pace of 300 per year.

CVS said the combined annual revenues will total $13 billion for 1997, second only to Walgreens' somewhat greater projected total of $13.3 billion. Walgreens' first 1997 fiscal quarter sales totaled $3.1 billion, as of Nov. 30,1996. The Deerfield, III.-based chain has about 2,250 drugstores in 34 states plus Puerto Rico.

Was prescription price pressure from private managed care a factor in the CVS-Revco merger talks? Industry observers said Yes. …

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