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Paragon shareholders OK sale to Shoppers Drug Mart
July 30th, 2012
KELOWNA, British Columbia – Shareholders of Paragon Pharmacies Ltd. have given the green light to the western Canada drug chain's sale to Shoppers Drug Mart Corp.
Paragon said the $73.5 million (Canadian) deal was approved at the company's shareholders meeting late last week in Winnipeg, Manitoba. The transaction is expected to close Aug. 1.
Shareholders also approved the change of the corporation's name to PGNX Capital Corp., or such other name as the Paragon board deems appropriate, and the election of Randy Henderson, Bob Silver, Eric Stefanson, Denis Taillieu and Martin Weinberg to the board.
Under the cash deal announced in late May, Shoppers Drug Mart plans to acquire Paragon's 19 retail pharmacies and its three central fill pharmacies in British Columbia, Alberta and Manitoba.
Earlier this month, according to the terms of the agreement, Paragon and Shoppers Drug Mart agreed to lower the initial $75 million purchase price by $1.5 million.
Paragon, a publicly traded company on the TSX Venture Exchange, also reported third-quarter results last week.
Revenue for the quarter ended May 31 rose 2.3% to $19.26 million. Comparable-store sales grew 2.3%, reflecting gains of 1.7% in the pharmacy and 3.9% in the front end. Prescription count was up 3.4% from a year earlier.
Pharmacy results were impacted by reductions in generic drug prices stemming from regulatory reform in British Columbia and the shift of additional medications from brand-name to lower-priced generic alternatives, according to Paragon. In the front of the store, the retailer's focus on strengthening its merchandising and promotional offerings — including an expanded food selection and more items in the Paragon Naturals line of natural health products (such as vitamins and supplements, body care and homeopathy) — helped boost sales, Paragon said.
For the nine months ended May 31, Paragon's sales dipped 0.2% to $57.92 million. Same-store sales declined 1.2% in the pharmacy but climbed 4.2% in the front end.
Paragon also cited improved operating and earnings results. Adjusted EBITDA (before transaction costs) rose to nearly $1.1t million for the third quarter from $428,000 a year earlier. For the nine-month period, adjusted EBITDA came in at $3.34 million, compared with $2.14 million in the year-ago quarter.
The net loss for the third quarter (before transaction costs) was $156,000, compared with $1.14 million a year earlier. In the nine months, the net loss was almost $1.53 million versus $2.54 million in the prior-year period.
"The commitment and focus from the entire Paragon team has continued to bring a significant improvement in the operating results for the company," Paragon chief executive officer R. Gordon Gooding said in a statement. "Prior to transaction costs, EBITDA for the first nine months of the fiscal year was up 56% from the previous year. We anticipate that the strong EBITDA performance prior to transaction costs will continue through to the completion of the sale of the Company's assets to Shoppers Drug Mart."