Mar 27, 2001 - 07:56 PM

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Drug Emporium Files for Chapter 11 Bankruptcy Protection

By Charley Gillespie, Associated Press Writer

COLUMBUS, Ohio (AP) - Drug Emporium Inc. filed for Chapter 11 bankruptcy protection Tuesday as a condition of the company's sale to a Minnesota-based drugstore company.

Under the agreement, all of Drug Emporium's existing common stock, options and other equity rights would be canceled during the reorganization. The company's current shareholders would get little or no money from the sale.

Additionally, Drug Emporium will close 51 of its 131 stores, including locations in Atlanta, Ga., and all of California. Snyder's will pay approximately $25 million to acquire all the remaining 80 stores, which will keep the name Drug Emporium. In addition, Snyder's will pay a significant portion of Drug Emporium's debts.

"We are kind of excited," John Green, Snyder's chief administrative officer said Tuesday. "By combining the two companies, we are on our way to sales of over a billion dollars."

Green acknowledged that some Drug Emporium employees will lose their jobs, especially with the merger of the corporate offices. "We hope to keep as many of their employees as possible, because they are good workers and good people," he said.

The reorganization must be approved by the bankruptcy court. Drug Emporium announced in January that it might sell some assets to regain its financial footing. The company also acknowledged discussions then about a possible sale and warned that any sale likely would not produce any value for the company's shareholders.

"The filing of the Chapter 11 is a crucial step in the process of revitalizing Drug Emporium. After the reorganization, we believe that the company will be financially stronger and in a better competitive position," David Kriegel, Drug Emporium's chief executive, said in a prepared statement.

Drug Emporium has said it will maintain normal store operations through the reorganization and acquisition. Drug Emporium owns and operates 131 stores under the names Drug Emporium, F&M Super Drug Stores and Vix Drug Stores. The company also franchises an additional 34 stores under the Drug Emporium name.

The Chapter 11 filing follows a series of financial setbacks for the company based in the Columbus suburb of Powell. The company reported an $8.7 million loss for its third quarter, which ended Nov. 25. It sold its online drug store last summer to HealthCentral.com after losing millions on the venture.

Drug Emporium was delisted from the Nasdaq Stock Market March 14.

AP-ES-03-27-01 1956EST © Copyright 2001 Associated Press.

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