The pharmacy operator officially announced the completion of the transaction with AVE Group

At the beginning of November 2014, the St. Petersburg pharmaceutical company BSS LLC will complete the first stage of rebranding of the 36.6 pharmacies, which it purchased from the pharmaceutical retailer AVE Group (Moscow). By this date, the equipment configuration, corporate colors and signs will be changed from “36.6” to “Aloe” at 14 points in Murmansk. The complete rebranding of the 71st pharmacy will be completed by the first quarter of 2015. According to analysts, investments in rebranding and integration of pharmacies into a single network could amount to up to 40 million rubles.

The pharmaceutical company BSS disseminated information about the closing of the transaction to acquire the 71st pharmacy "36.6" from the Moscow AVE Group on Friday, although the fact of the transaction was known back in September.

FSU said the deal was closed last week. The company acquired 14 pharmacies "36.6" in Murmansk, 18 in Yekaterinburg, and the remaining points are located in the Central Federal District.

The company explained that AVE Group also sold pharmacies in St. Petersburg, but the company considered them unprofitable and preferred to develop in the regions.

Before the purchase of pharmacies "36.6" from BSS, 34 pharmacies operated in the Northwestern Federal District, of which 20 were under the Edifarm brand, and the rest under the Aloe brand. The company is rebranding the Edifarm chain, also intending to completely bring this chain under the single Aloe brand by the first quarter of 2015, like all acquired 36.6 points. In addition, Olga Chernova, general director of the Aloe pharmacy chain, explained that the company will change the “36.6” trading matrix.

““36.6” worked in a fairly high price segment, we will work in the low and medium price segment, with an emphasis on products based on natural ingredients,” Ms. Chernova said.

Representatives of AVE Group could not be reached by phone on Friday.

The BSS company was founded in 1996; today the company structure includes ten branches with warehouse complexes, seven territorial sales offices. There are more than 8 thousand drugs in the BSS product matrix. According to DSM Group, at the beginning of October 2014, the first place in terms of sales among pharmacy chains is occupied by Rigla with 12.6 billion rubles (1,074 points of sale), the second place is AVE Group with 11.8 billion rubles (669 points of sale).

BSS refused to name both the amount of the transaction and the amount of investment that they plan to use to integrate new pharmacies into their network.

Maxim Klyagin, an analyst at Finam Management, estimated the deal, taking into account the fact that the objects are mainly leased, in the range of 110-140 million rubles.

“As for investments in rebranding and some repair work, this figure can vary significantly depending on the condition of retail facilities and the specific tasks of rebranding. It is quite difficult to estimate unambiguously, but, according to rough calculations, the costs of revitalization and integration of new facilities into a single the network could amount to another 30-40 million rubles,” he said.

In his opinion, as part of the AVE Group business combination strategy, shareholders are focused on further reducing the debt burden and increasing the margin of “36.6”, which, apparently, is associated with a fairly large-scale sale of the group’s insufficiently profitable local assets. “For local players, the purchase of company facilities can be a profitable solution due to more efficient management and the formation of positive economies of scale from integration with existing core businesses,” concludes Mr. Klyagin.

The head of the marketing and pricing policy department of the Violet group of companies, Andrei Gortinsky, says that the turnover of the pharmacy chain market in Russia is more than 300 billion rubles for the first half of 2014, with 25% of this coming from the 15 largest chains. “St. Petersburg accounts for about seven percent of this volume,” concludes Mr. Gortinsky.

Maria Shishkina, an analyst at Russ-Invest Investment Company, believes that the sale of regional pharmacies is in line with the “36.6” strategy, within the framework of which it was previously decided to sell regional pharmacies and focus on the development of pharmacies in the capital region and within the Golden Ring. And Murmansk was named a non-strategic region in the 2013 report. “The fact is that it was difficult for pharmacies to compete in the regional market given its saturation. Moreover, the revenue of regional pharmacies showed a decrease of fifteen percent last year, and of Moscow - four percent,” she says.

Yulia Chayun

BSS is rapidly expanding its business