GEHE Offer For Lloyds Now Hangs In The Balance

After a protracted battle fought by Germany's GEHE to acquire the UK drugstore chain Lloyds Chemists, outbidding rival UniChem with a L649.9 million ($1.01 billion) offer (Marketletters passim), the deal may still not go through. This follows a UK government ruling that GEHE (or UniChem if it bought Lloyds) would have to divest some of Lloyds' wholesaling operations.

GEHE says it is assessing the implications of the Secretary of State for Trade and Industry's announcement, and considering the contents of the Monopolies and Mergers Commission's report published July 19. It says that while it remains convinced of the strategic rationale of the acquisition, it believes that the undertaking required will materially impact the level of synergies previously thought to be available. The Department of Trade and Industry has said that seven of the company's 12 wholesale units have to be sold by October 1997.

GEHE, which acquired UK drug wholesaler AAH (with the bulk of its sales achieved through wholesaling) in March of last year, is also concerned about the implications for Lloyds' ongoing trading profitability of the profits warning announced by the company on July 9, and on press reports of deteriorating staff morale at Lloyds leading to staff departures.