ONE OF the State’s best known pharmacy chains is heading for arbitration proceedings next week following the failure of a €50 million takeover.
Three years ago, Sam McCauley Chemists, which operates a chain of pharmacies across the south-east and east, approached a smaller rival, owned by Adrian Dunne, to discuss a takeover valued at about €50 million.
Following due diligence, the initiative did not go ahead, and the matter is now due to go before formal arbitration proceedings early next week. The Dunne group wants McCauley to proceed but the intended purchaser is refusing to do so, and is understood to have made a counter-claim.
Arbitration is carried out in private. Companies frequently use it to resolve disputes, generally because they do no want to air confidential or commercially sensitive information in public. The process is cheaper than a full court hearing.
Both parties refused to comment when contacted recently.
Wexford-based Sam McCauley Chemists owns pharmacies in locations stretching from south Co Dublin, through the southeast to Cork and Kerry. Various members of the McCauley family own the business.
The company employs 570 people. According to the most recent accounts for the group’s parent, Sam McCauley Chemists, it made an operating profit of €5.2 million in 2008 on a turnover of €85 million. Pretax profits were €3.4 million.
Mr Dunne owns the Adrian Dunne group through a holding company, DM Pharmacies. He also owns a number of the properties that house some of its chemist shops. The company employs 140 people and has pharmacies in a number of locations in Dublin, Meath, Wicklow and two in Portarlington, Co Laois.
According to the group’s website, Mr Dunne, from Kilcullen, Co Kildare, bought his first shop in 1999 in Whitehall on Dublin’s north side, and followed that up two years later with the purchase of John Byrne’s pharmacy in Portarlington.
The fact that the group has outlets in areas where McCauley has no presence may have made it attractive to the bigger operation.
The Dunne group does not produce consolidated accounts. Its parent is classed as a small business and is not obliged to file a profit and loss account with its returns.
DM’s 2008 balance sheet valued its subsidiaries, the group’s chemists shops, at €31 million, which was in line with 2007, the year in which the McCauley deal was done.
Retail businesses such as chemists’ shops are generally valued according to sales, cash flow and other factors. It is not possible to say what measures McCauley used to value Dunne.
Arbitration proceedings are “quasi-judicial”, which means that, as in a normal court, one person acts as a judge by hearing both sides and making a ruling.
More often than not, a senior counsel presides over the hearings. The parties involved have to agree to be bound by whatever rulings he or she makes.
