Merckle Family Could Sell Parts Of Phoenix

Germany's Merckle family will likely need to sell parts of pharmaceuticals distribution business Phoenix Pharmahandel GmbH & Co KG in addition to all of its generic drug making business Ratiopharm to reduce its crippling debts, a person familiar with the matter told Dow Jones Newswires.

"The sale of individual parts is the most likely scenario at present," the person said about Phoenix.

Phoenix's German operations are expected to remain a part of the Merckle empire, but foreign holdings such as pharmacy chains owned by Phoenix's Finnish unit Tamro could be divested, another person familiar with the matter said. Specifically, Tamro acquired several pharmacy chains in the Baltic region in recent years which could be sold by the Merckle family, the person added.

A spokesman for Phoenix declined to comment on the matter.

A third person familiar with the matter said that more details on what parts of Phoenix could be divested will emerge after a buyer is lined up for Ratiopharm.

"Currently the interested bidders are waiting for signs which parts of Phoenix are for sale," the person said. Fully-financed, binding bids for Ratiopharm are due March 18. The bidders include U.S. pharmaceuticals company Pfizer Inc. (PFE), Israeli drug maker Teva Pharmaceutical Industries Ltd. (TEVA) and Iceland's privately-held Actavis Group.

According to media reports, Phoenix's holding company VEM Vermögensverwaltung GmbH has already received interest from potential buyers in the past, including the U.K. pharmaceuticals company Alliance Boots PLC (AB.YY), U.S. drug distributor McKesson Corp. (MCK) and U.S. health care services company Medco Health Solutions Inc (MHS)

VEM is the holding company which controls Phoenix, Ratiopharm and the Merckle family's other holdings.

VEM is said to face up to EUR4 billion in debts, in part the result of soured stock bets amassed by its founder Adolf Merckle. Merckle killed himself early last year, leaving his eldest son Ludwig to sort through the family empire's financial woes. Aside from VEM's larger debts, Phoenix is also seriously over-leveraged, a fourth person familiar with the company's situation said. Phoenix's net debts are around six times its earnings before interest, taxes, depreciation and amortization, or EBITA, the person said. "Phoenix has its own problems to solve."

The Phoenix group employed 23,000 people and earned EUR21.5 billion in revenues for the financial year ending January 31. The German Phoenix subsidiary earned EUR6.5 billion in revenues for the time period, with earnings before interest and taxes of EUR68.6 million.

-By Eyk Henning; Dow Jones Newswires; +49 69 29 725 515; eyk.henning@dowjones.com

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