BIG Pharmacy to acquire competitor Caring Pharmacy for RM900mil with plans to IPO

BIG Pharmacy Healthcare Sdn Bhd (BIG Pharmacy) will be acquiring Caring Pharmacy Group Bhd (Caring) from 7-Eleven Malaysia (7-Eleven) for RM900 million, The Edge reported on July 21.

Backed by Malaysian private equity firm Creador, BIG Pharmacy was the third highest bidder for Caring, sources told The Edge.

The two other main bidders were US-based private equity fund, Carlyle Group, and Luxembourg-based investment advisory firm CVC Capital Partners.

The Edge wrote in October 2022 about Carlyle Group’s interest to acquire Caring, having been at the “advanced stage of negotiation”. Sources said that the US-based group had made a RM1.3 billion offer for Caring, but 7-Eleven was seeking between RM1.5 billion and RM1.8 billion.

Negotiations with both Carlyle Group and CVC Capital Partners were said to have fallen through.  

Thus, emerging as the winner was the next-in-line, BIG Pharmacy.

Who’s caring about Caring Pharmacy?

Founded in 1994 by five pharmacists who were university friends, Caring was bought by 7-Eleven in 2020 for RM292 million. Prior to that, Caring had been publicly traded on Bursa for six years before 7-Eleven voluntarily delisted it.

7-Eleven has a 75% stake in Caring, with the remaining held by investment holdings company Motivasi Optima Sdn Bhd.

The convenience store operator’s sale of the pharmacy may not come as a surprise, as Bloomberg reported that it had been contemplating the decision since July 2022.

At the time, CGS-CIMB Research found that such a move could boost the convenience chain’s earnings-per-share in FY23-24.

This was assuming the company receives cash proceeds of RM1.3 billion, and pares down its debts completely.

The possible sale of Caring Pharmacy has driven up 7-Eleven’s shares by 7 sen to RM2.20 at the time of writing, after hitting a high of RM2.29 this morning.

BIG Pharmacy’s big plans

Established in 2007 by couple Lee Meng Chuan and Lim Sin Yin, BIG Pharmacy got its start in Damansara Uptown.

Lee and Lim collectively have a direct stake of 15% in the pharmacy chain and also an indirect stake of 40.22% via holdings company Uptown Paradise Sdn Bhd.

According to The Edge, BIG Pharmacy has plans to launch an initial public offering (IPO).

To be able to list an IPO, a company must first meet quantitative and qualitative criteria. That may explain why BIG Pharmacy is actively expanding its stores ahead of the planned IPO.

The acquisition of Caring may be one way for it to expand.

Both Caring and BIG Pharmacy are some of the biggest pharmacy chains in Malaysia, with 282 BIG Pharmacy outlets across Malaysia, and Caring with a total of 199 outlets as of March 2022.

The consolidation of pharmacies (whereby larger chains acquire smaller retailers) seems to be commonplace in Malaysia’s pharmacy scene.

For one, Caring’s growth in recent years has been thanks to acquisitions of smaller chains such as The Pill House Pharmacy Sdn Bhd and Willings Pharmacy Sdn Bhd.

Similarly in 2018, Creador had merged its retail pharmacy chain, RedCap Pharmacy, with BIG Pharmacy, renaming all the stores to BIG Pharmacy.

Creador now has a 35.03% stake in BIG Pharmacy, held through Iris Pallida Sdn Bhd.

The private equity firm’s founder and CEO Brahmal Vasudevan told The Edge back in 2019 that firm was “actively looking for targets”, referring to existing industry players to take over.

The latest target is Caring, of course. It’s unclear whether Caring will continue to operate as an independent brand, or if it will rename all stores to BIG Pharmacy.

At the time of writing, the transaction between 7-Eleven and BIG Pharmacy has not been officially announced, but is expected to be made as soon as today.

Featured Image Credit: BIG Pharmacy / KK Ang