Discount retailer Fred’s Inc. FRED recently completed the takeover of Reeves-Sain Drug Store, Inc. for approximately $66 million to strengthen its specialty pharmacy portfolio. The company had announced the deal on March 25, 2015. Fred's financed the acquisition with $53 million in cash and a note payable worth $13 million. The company expects the acquisition to be accretive to earnings per share in fiscal 2015.
Reeves-Sain Drug Store, a private specialty and retail pharmacy company, operates in Murfreesboro, TN and includes both EntrustRx and the single Reeves-Sain retail pharmacy. EntrustRx provides specialty pharmaceuticals to treat complex conditions and diseases and is licensed in 50 states. The pharmacy’s main therapy lines include hepatitis C, oncology, growth hormones, multiple sclerosis and rheumatology.
The acquisition of EntrustRx, which has a strong regional presence in South East, will further expand Fred’s’ presence in the specialty pharmacy arena — the largest growth area in the pharmacy industry. EntrustRx will also offer Fred’s access to expanded specialty networks as well as limited-distribution medications, and expertise in different disease states.
We note that Fred’s’ pharmacy department has been delivering strong results backed by higher scripts and sales. The ongoing expansion of pharmacy departments and growth of the specialty pharmacy division have given a boost to this category. The recent acquisition is also expected to add meaningful synergies and generate solid revenues.
Fred’s has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector are Burlington Stores Inc. BURL, Costco Wholesale Corp. COST and Ross Stores Inc. ROST. All the stocks carry a Zacks Rank #2 (Buy).
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