Largest bankruptcy creditor wins bid for Family Pharmacy

Pending a final order of sale, the bankruptcy proceedings for Family Pharmacy Inc. have concluded, with Smith Management Services LLC, an affiliate of J.M. Smith Corp., providing the winning bid for just shy of $16 million.

During a sale hearing yesterday in a federal bankruptcy courthouse in Kansas City, Smith Corp.’s court-approved bid was nearly $14 million in cash and $2 million in credit to obtain Family Pharmacy’s assets, said Jim MacLaughlin, the chief restructuring officer hired in the Ozark-based independent pharmacy’s Chapter 11 bankruptcy reorganization case.

South Carolina-based Smith Corp. subsidiary Smith Drug Co. is Family Pharmacy’s primary wholesale pharmaceutical distributor and its largest creditor, according to bankruptcy court documents.

MacLaughlin, co-owner of Kansas City-based advisement firm Lloyd & MacLaughlin LLC, said Smith Corp. beat out several other bidders in the process, which included an Aug. 3 auction.

“In the end, we had what we determined to be six qualified bidders that met the requirements of the bid procedures,” MacLaughlin said.

He said the other bidders were The Bank of Missouri, Walgreens, Hy-Vee Inc., Benzer Pharmacy, and a group of operators of southwest Missouri pharmacies comprising Koby Prater, Ryan Summers and Mike Stuart, who submitted a joint bid.

The transaction closing date is scheduled for Aug. 31. MacLaughlin said the backup bidder selected was a separate joint bid offered by Prater, Summers and Stuart, who teamed up with Walgreens, at yesterday’s sale hearing.

He said Chief Bankruptcy Judge Cynthia Norton would enter an order for the sale along with the backup bid in the next few days.

“The company’s team of employees have largely remained intact, and the scale and scope of the operations continues as it did before the bankruptcy,” he said, adding Family Pharmacy currently employs 172 at its 20 retail pharmacies and two long-term care pharmacies.

In the bankruptcy proceedings, Family Pharmacy cited two years of net losses totaling $7.5 million. The company posted net losses of $3.5 million in 2017 and $4 million in 2016, following profits of $686,000 in 2015. In 2017, gross revenue dropped to $60.3 million from $66.8 million in 2016 and $68.3 million in 2015.

Smith Corp. representatives referred questions about the sale to Carrie Tennis, director of operations for Family Pharmacy. Tennis did not immediately return a message.

Family Pharmacy has been owned by Lynn and Janet Morris since 1977, when the company was founded. The couple indicated in May they had retired from the business, according to past Springfield Business Journal reporting.