Supersol to Buy Half of Neopharm for $41m; Rivals Complain

Market players note that Isal, controlled by Ronny Alro'i, is selling 50 percent of the company to Supersol at cut-rate prices.

Supersol announced yesterday that it will pay Isal $41 million for 50 percent of Neopharm, shaking up the retail market. This time, Supersol has angered not only rival Blue Square, but management at Super-Pharm.

Super-Pharm CEO Lior Reitblatt reiterated yesterday that Super-Pharm would oppose the merger. "Supersol got a shot in the arm with the Clubmarket merger, and there is no reason to give it another one. Balance in the market was already thrown off, why throw it off any further?" Reitblatt commented.

Market players note that Isal, controlled by Ronny Alro'i, is selling 50 percent of the company to Supersol at the price it paid, indicating an understanding that merging is the only way to inject value into Neopharm.

Neopharm chair Giora Inbar disagrees. He called the merger "the right strategic move for Neopharm.

"We didn't look for capital gains or a premium; we acted as fairly as we could toward a partner we see as a long-term strategic partner. Neopharm without Supersol is a small, profitable chain that has improved its performance year over year. With Supersol, Neopharm can stride faster toward out goals," he said.

The merger between Supersol and Neopharm garners Supersol more market share. Reitblatt said AC Nielsen research from September indicated that Supersol holds a 32.4-percent market share in toiletries since the Clubmarket merger, and Super-Pharm holds a 20.9-percent share. Reitblatt said that before the merger, Supersol's market share was similar to Super-Pharm's, at 23 percent.

Reitblatt noted the overlap between the retail pharmacy market and the major grocery chains. "Except for make-up and high-end cosmetics - 10 percent of Super-Pharm's turnover, and prescription drugs - 13 percent of Super-Pharm's turnover, everything else overlaps," he said. Reitblatt has been quoted as saying the prescription drug sector generates losses for the retail pharmacies, although it does bring the customers in the door.

Inbar says the merger will boost competition in the sector. "There are really just two chains in this sector, and one of them, Super-Pharm, is very dominant. The stronger the second retailer becomes, the stiffer competition will be and the consumer will benefit," he said.