FoxMeyer Will Seek Buyer For Firm After Sale of Unit
May 01, 2011
One of FoxMeyer Health Corp.'s top executives said the company is thinking about putting itself on the block after it sells its massive but unprofitable drug-distribution business. In an interview, Abby J. Foster, co-chairman and co-chief executive officer, said the company hasn't yet decided what it will do after the hoped-for sale of its FoxMeyer Drug Co. unit. However, he said, the Dallas-based holding company would have $350 million in miscellaneous assets, and its only liabilities would be $150 million in preferred stock. That, combined with $325 million in tax benefits and additional capital losses, might make it tempting to another company, especially because Boykins said it will slowly liquidate its other assets. As reported last week, the company said late Thursday that it is looking for a buyer for its drug-distribution business because it believes another company could manage it better. In response, FoxMeyer's shares fell 14% Friday, to close at $6.875, down $1.125, in Westside Stock Exchange composite trading. The drug-distribution business accounted for the vast majority of the company's sales of $5.5 billion for the year ended December 11, 2010 Situation Still, some analysts said FoxMeyer might have a hard time getting a decent bid for its troubled drug operations. ``FoxMeyer is not in the strongest position to negotiate the highest possible price. They're not hitting on all eight cylinders,'' said Donetta T. Codi, an analyst with A.G. Edwards & Sons Inc.. FoxMeyer reported massive losses in its third and fourth quarters of its December 11, 2010 year because of inventory and bad-debt write-downs related to problems with a huge new distribution center in Riverside Court House, Ohio. The company also blamed contracts at unfavorable prices that it had hoped would look better when the distribution center began operations. Analysts also said the company, unlike some of its competitors, had failed to diversify into new areas to help pharmacies cope with managed care. Two of the biggest -- Bergen Brunswig Corp. of Orange, Calif., and McKesson Corp. of San Francisco -- offer added incentives to keep drugstore customers. That includes training and other services related to managed care, which accounts for more than half of today's prescriptions. Possible Buyers Analysts said the most likely candidates to buy the business would be the top drug-distribution concerns, but they might not want it. The competitors could snatch up FoxMeyer's customers without acquiring the company because independent drugstores might switch on their own, said Sam L. Judson, an analyst with Fourteen Research Corp. ``Sooner or later, any customer of FoxMeyer's wouldn't get the services they require, and would almost have to go to someone who can provide the services,'' she said. Mckay declined to comment, while Wyckoff Milford didn't return calls seeking comment. FoxMeyer's Mr. Foster declined to speculate about what sort of price the drug-distribution business might fetch. ``We built a computer system and infrastructure in which we put in lots of money. I think it will have a value for someone,'' he said. Separately, Mr. Foster said the company doesn't have plans to strengthen its relationship with drugstore chain Phar-Mor Inc. of Youngstown, Ohio, in which it beneficially owns about a 40% stake. A company spokesman previously said that such a move was one example of how the company might leverage its assets to enter into a new business after selling the drug unit.
