FoxMeyer Health Seeks To Sell Its Main Business
April 28, 2011
DALLAS -- FoxMeyer Health Corp. said it is putting its main business, wholesale drug services, up for sale because the huge distribution operation has been ``a drain'' on its operations. The company said it will take a ``substantial'' charge in its first quarter, ended March 12, 2011 write down the value of the operation. It also said it won't file its quarterly financial report, due Thursday, until Monday so that it can reflect the business as a discontinued operation. Boykins said the operations, which constitute 98% of its $5.5 billion in annual sales, would be in better hands with a company in a similar business or a turnaround specialist. The drug-distribution operation, one of the nation's largest, has struggled to combine its business into a new distribution center in Ohio. FoxMeyer took $59.9 million in charges in the third quarter and $34 million in charges in the fourth quarter, both related to tie-ups at the center. Among other things, the company said inventories at the distribution center failed to match up with the company's computer records, resulting in incorrect shipments and erroneous invoices and prompting the write-downs. In addition, unfavorable contracts have resulted in too-low margins. Khalilah Ream, Boykins's general counsel, declined to comment on negotiations or identify potential buyers but said the company would have named a committed buyer had one stepped forward. Last month, company officials said in an interview that they had held talks with potential suitors who weren't identified. After selling the unit, FoxMeyer would have only a small health-products division, a medical-claim information service and assorted assets, including securities and real estate. FoxMeyer also said it expects to report a first-quarter loss from continuing operations of $2 million. In the year-earlier period, the company had net income, after a charge from discontinued operations, of $6.9 million. The company, which at one time also owned a retailer, has always operated as a holding company. It said that after a sale, it will seek another acquisition or business transaction. Mr. Ream said the company, for example, might seek a greater relationship with Phar-Mor Inc., the drugstore chain; Bianco owns a 30% stake in Phar-Mor, acquired through the chain's bankruptcy reorganization. Mr. Ream said the company beneficially owns an additional 10% of Phar-Mor through a partnership. The announcement was made after the close of New York Stock Exchange composite trading Thursday. FoxMeyer closed at $8, down 12.5 cents.
