Fred’s is selling assets of EntrustRx, its specialty pharmacy unit, to a subsidiary of CVS Health for $40 million plus inventory value costs. The move comes more than two weeks after Fred’s CEO Michael K. Bloom resigned from his position. Joseph Anto, EVP, CFO and Secretary at Fred’s, has filled the Interim CEO role since April 24, 2018.
Anto said in a statement that the cash proceeds from the sale will help Fred’s pay down a significant portion of its debt, and indicated that monetizing non-core assets is a top priority for the pharmacy in 2018.
The pharmacy is tightening its belt and adjusting its approach in the aftermath of the failed merger of Walgreens and Rite Aid, which would have entailed Fred’s acquiring 865 U.S. stores for $950 million. That deal would have positioned Fred’s as the third-largest drugstore chain in the U.S.
Despite the changes at Fred’s, the pharmacy insisted in a statement that Bloom’s “resignation was not the result of any disagreement with the company or its operations.”
As Fred’s Contracts, CVS Keeps Growing
While Fred’s is narrowing its focus, the deal aligns with CVS Health’s plans to increase its influence in health care, having already acquired health insurer Aetna for $69 billion. The company saw pharmacy services revenues increase 3.2% to $32.2 billion in Q1, with pharmacy same stores sales jumping 7.3%. With EntrustRx, CVS can introduce its patients to a wider array of holistic pharmaceutical care and therapies.
The pharmacy already has 9,700 locations and 1,100 MinuteClinic walk-in clinics, as well as more than 4,000 CVS Health nursing professionals who provide in-clinic and home-based care nationwide. But the addition of a specialty pharmacy, on top of the member data provided by Aetna, could give CVS another powerful asset in catering to individual patients.