This article first appeared in The Edge Malaysia Weekly on October 17, 2022 - October 23, 2022
US-based private equity fund Carlyle Group is believed to have submitted a bid to buy Caring Pharmacy Group Bhd from convenience store operator 7-Eleven Malaysia Holdings Bhd. At the same, it is learnt that 7-Eleven is finalising negotiations to buy Sarawak-based retail pharmacy chain JOM Pharmacy.
“Both negotiations are at an advanced stage,” a source tells The Edge. The source adds that Carlyle Group, which has US$376 billion in assets under management, made a RM1.3 billion offer to buy the retail pharmacy chain but that 7-Eleven is seeking between RM1.5 billion and RM1.8 billion.
Even as talk of 7-Eleven’s potential exit from the pharmaceutical segment is ongoing, it is understood that Caring is in the process of buying JOM Pharmacy. One source tells The Edge that the purchase “is as good as a done deal”. Industry sources opine that the acquisition of JOM Pharmacy by Caring, which opened its maiden store in Sarawak in August, is to gain an immediate foothold in the state. JOM Pharmacy has 15 outlets across Kuching, Semarahan and Serian.
In its annual report for the financial year ended Dec 31, 2021, 7-Eleven said that the pharmaceutical segment had shown much resilience during the pandemic and thus, it will continue to strengthen its market share.
As at press time, 7-Eleven had yet to respond to queries.
Carlyle Group, meanwhile, said that it does not comment on market speculation.
Why is Caring acquiring a retail pharmacy chain amid plans by 7-Eleven to exit the business? An observer says that it is possible that 7-Eleven hopes to arbitrage and profit from it by selling the combined business. Caring may also be expanding its network through acquisitions in the event the sale by 7-Eleven does not materialise.
7-Eleven owns 75% of Caring, while the remainder is held by Motivasi Optima Sdn Bhd. 7-Eleven’s largest shareholder is Berjaya Corp Bhd founder Tan Sri Vincent Tan, who controls 41.095% of the company.
In July, Bloomberg reported that 7-Eleven was working with an adviser on the potential divestment of the pharmacy group and had attracted interest from some Japanese parties. It was also reported that the company could seek a valuation for the retailer of about US$400 million. In August, 7-Eleven told The Edge that it was in the preliminary stage of discussions with several parties to sell its stake in Caring.
There is not much information on JOM Pharmacy, as the website which could be viewed two weeks ago now reads, “We are currently performing some scheduled maintenance. We will be back as soon as possible. Please check back soon.” However, based on information available on its Facebook page, JOM Pharmacy has 13 years of experience in the pharmacy business.
A search on the Companies Commission of Malaysia website shows that JOM Pharmacy Sdn Bhd’s shareholders are Kok Kian Min and Kok Kian Wei, who hold 49% and 51% respectively in the company. Based on the latest available data for the financial year ended Aug 31, 2020, JOM Pharmacy posted a net profit of RM93,074 on the back of RM14.74 million in revenue. It then had 11 outlets.
Caring was established in 1994 by five pharmacists who were coursemates at the School of Pharmacy, Universiti Sains Malaysia. The business was listed on Bursa Malaysia from 2013 until May 2020. 7-Eleven took over Caring in June 2020.
In 2021, Caring Pharmacy acquired a 67% stake in The Pill House Pharmacy Sdn Bhd, which operates retail pharmacies under the Georgetown brand, and a 60% stake in Wellings Pharmacy. These acquisitions expanded Caring’s footprint into the northern part of Malaysia covering Penang, Kedah and Perlis. The deals also included a put and call option agreement with the seller for the remaining 33% and 40% stake in The Pill House and Wellings respectively.
Following the acquisitions of The Pill House and Wellings, 7-Eleven added another 35 outlets to its portfolio, bringing the combined outlet count to 191 at end-2021.
Through the recently announced joint venture with PT Era Caring Indonesia, Caring has ventured into the Indonesian market, and has successfully opened seven Wellings stores in the republic.
In the financial year ended Dec 31, 2021, Caring saw revenue surge by 160.6% to RM997.87 million from RM382.97 million the previous year. Net profit grew by 192.3% to RM42.96 million from RM14.69 million. As at Dec 31, 2021, Caring had total liabilities of RM382.57 million, of which RM225.78 million are current. Total assets stood at RM544.62 million. Caring has also retained earnings of RM107.83 million.
In the first six months ended June 30, 2022, 7-Eleven’s net profit expanded 292% to RM50.15 million from RM12.79 million, as cumulative six months’ revenue climbed 33.73% to RM1.78 billion from RM1.33 billion.
Revenue from the pharmaceutical segment increased by 37.4% to RM615.4 million, while net profit rose by 119.1% to RM28.7 million.
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