TWINSBURG, Ohio — Revco D.S. Inc. agreed to buy Hook-SupeRx Inc. for $13.75 a share, or about $600 million, creating what would be the country's second-largest retail drugstore chain.
The purchase, expected to close in early summer, comes less than two years after Revco emerged from Chapter 11 bankruptcy proceedings and ensures the company a major position in the rapidly consolidating retail drug industry.
Adding the 1,200 stores run by Cincinnati-based Hook-SupeRx would double Revco's total to almost 2,400. Geographically, Twinsburg, Ohio-based Revco will expand to 22 states from the nine eastern states where it now operates.
In markets that overlap, the Hook-SupeRx stores will give Revco a broader base from which to battle its biggest competitor, Rite-Aid Corp., the largest U.S. drug retailer.
"It's a good match," said Phil Muldoon, analyst with McDonald & Co. in Cleveland. "There's not that much overlap in terms of market."
The per-share price being paid for Hook-SupeRx is 50% above its closing stock price Thursday, and news of the acquisition pushed up the share price almost 40%.
Hook shares jumped $3.675 to $12.75 on the New York Stock Exchange, Revco's shares eased 67.5 cents $15.75.
The transaction is subject to Revco raising as much as $175 million through the sale of senior subordinated debentures.
Revco's planned purchase of Hook-SupeRx is the latest consolidation among retail drug chains. Last week, Kmart Corp. completed the sale of its PayLess Drug Store chain to TCH Corp., the owner of Thrifty Drug Stores.
The Hook-SupeRx transaction will bolster Revco's annual revenue to about $4.7 billion, more than double the $2.2 billion it reported for the fiscal year ended May 31.
"Obviously, one company that has nearly $5 billion in sales has a lot more wherewithal," Muldoon said. Revco said its strategy is both to increase market penetration in the nine states where it already operates and to push into new territory.
"Hook's, SupeRx and Brooks stores are similar to ours in size, average volume and merchandise," said D. Dwayne Hoven, Revco president and chief executive.
Shareholders who own about 49% of Hook-SupeRx shares outstanding agreed to vote in favor of the transaction, which also includes assumption of Hook-SupeRx's debt.
The investment group includes Goldman, Sachs & Co., Kroger Co. and Hook-SupeRx management. Hook-SupeRx, formed in 1986, acquired most of Kroger's retail drug store business.