Russia’s largest Rx chain sells shares to repay debts
MOSCOW Pharmacy Chain 36.6, Russia’s largest pharmacy chain, is selling shares to fund expansion and repay debt in an effort to help ease the pain of the current economic crunch that has hampered retailers’ efforts to finance themselves, according to a local news report.
Citing a company spokeswoman, the report states that the company will sell 85.5 million common shares with the price to be determined by the board if shareholders approve the sale on Jan. 9. Proceeds will be used for purposes “including restructuring of the company’s debt.”
JPMorgan Chase analyst, Elena Jouronova, estimates that the company would need $150 million in “fresh capital” in 2009 to meet debt obligations, according to the report.
On Dec. 2 when the company released its most recent financial results president Jere Calmes said, “We achieved some noteworthy successes over last year in our Q3 results. In the latest reporting period, we have successfully sold a portion of our closed end real estate fund, which improved our Q3 net profit result and reduced our debt. In the retail unit, we were able to deliver a positive EBITDA on the back of a healthy recovery in our gross margin and a significant reduction of SG&A as a percentage of sales. However, the current business environment remains extraordinarily tenuous and operational results are being negatively impacted. The company’s management is working with the board of directors to find solutions for financing the business through these difficult times and will continue to focus on addressing working capital needs and streamlining operations.”
Named after the ideal body temperature in Centigrade for healthy adults and children, 36.6 broke the mold when it introduced the Western-style, open format pharmacy in Russia in 1997. During the Soviet era, pharmacists operated from behind glass and no beauty products were sold in pharmacies.
After six years of building the brand, the company, whose roots technically date back to 1991 when it was a small pharmaceutical wholesale company, made headlines in 2003 when it became the first retail company to do an initial public offering. The IPO raised $14.4 million, money that enabled 36.6 to expand its store base and fund new initiatives.
Today, the company has nearly 1,200 pharmacies in 29 Russian regions and employs more than 11,000 people. Consolidated sales in 2007 were about $872 million.