The future of dozens of Priceline Pharmacy outlets across the country remains in limbo after an 11th hour rescue deal for the largest franchisee collapsed.
Retail group Wesfarmers placed 54 Infinity Pharmacy Group stores into receivership in December, with creditors owed more than $400million.
The Australian conglomerate had considered bailing out Infinity Pharmacy Group with fresh equity, but abruptly pulled the plug a week before Christmas.Â
Wesfarmers Health chief customer officer Richard Pearson described the move at the time as ‘unavoidable’, citing Infinity’s failure to meet financial obligations over a prolonged period and worsening debts.
This week he confirmed that recapitalisation plans will not go ahead.
‘Community pharmacies hold a trusted position in Australia, which the over-leveraged approach to network growth pursued by Infinity’s management risked undermining,’ Mr Pearson explained in a note to franchisees and staff this week.
‘Therefore, after extensive engagement with Infinity management and creditors and detailed financial due diligence, we had no option but to draw a line in the sand.’
Wesfarmers spent three years supporting Infinity Pharmacy Group before a ‘breakdown of trust across all parts of the relationship’ unfolded.
An 11-hour rescue deal for Infinity Pharmacy Group, Priceline Pharmacy’s largest franchisee, has collapsed
The move from Wesfarmers puts dozens of Priceline stores at risk
The retail giant accused Infinity’s owners of an ill-advised, debt-fuelled acquisition spree which left them unable to pay suppliers and creditors.
‘Time was running out because they owed money to a lot of people. The performance was deteriorating,’Â Wesfarmers Health managing director Emily Amos told The Australian Financial Review.
‘We were completing due diligence through December on the recapitalisation plan … in that time, the Infinity management team was off trying to buy more stores with more debt. We do not know where that money was coming from.’
Australian Pharmaceutical Industries is owed $110million, while three of the Big Four banks are owed a combined $145million.Â
Receivership firm KPMG and voluntary administrators Teneo have taken over operations of Infinity’s 91-store pharmacy network.
They are also facilitating the sale process, which has already attracted interest from rival pharmacy groups.
Infinity Pharmacy employs 1,200 staff across almost 100 stores, mostly located in Queensland and NSW.Â
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Priceline Pharmacy franchise group on the brink of collapse as more than $400million is owed to creditors