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CVS in talks with Revco
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January 27, 1997: 6:03 p.m. ET
Drugstore giants may prescribe a merger to challenge competitors
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NEW YORK (CNNfn) -- CVS Corp. and rival drugstore company Revco DS Inc. confirmed Monday that they are discussing a possible merger.
A joining of the two firms would create a drugstore powerhouse with $11 billion in combined revenue and 4,000 stores in the eastern United States.
The companies have warned that an agreement is not a certainty, although talks have moved beyond the preliminary stages. If they do agree to a merger, it would create the nation's second-largest drugstore chain, challenging current No. 1 Walgreen Co. and No. 2 Rite Aid.
At issue is whether CVS would pay a premium for Revco stock, which has surged 14 percent in the last two weeks, along with concern about the reaction anti-trust regulators might have to a merger.
Last year, regulators prevented Rite-Aid from acquiring Revco because the two shared too many common markets. That ruling came in the midst of an industry consolidation spurred by a need to compete with low-cost managed-care programs and mail-order companies.
Large supermarket chains and discounters such as Wal-Mart Stores Inc. have also cut into the profit margins of drug stores long accustomed to low levels of competition.
Woonsocket, R.I.-based CVS currently operates 1,408 drug stores in 15 states and the District of Columbia. It reported $5.5 billion in sales in 1996. Revco, based in Ohio, is expected to have $5.8 billion in annual sales when its fiscal year ends in May. It operates 2,200 stores throughout the eastern U.S. along with another 400 stores added under its agreement to buy Alabama-based Big B Inc. last December.
In Monday trading on the New York Stock Exchange, CVS closed down 1/8 to 42-7/8, while Revco shares lost 3/8 to 38-7/8. 
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