Despite repeated denials, United Company of Pharmacists takes steps to acquire stake in 19011 pharmaceutical chain

Despite denying it planned to do so in January, the United Company of Pharmacists, one of Egypt’s largest drug distributors, has undertaken preliminary but serious steps to acquire an unspecified stake in the heavily indebted 19011 pharmaceutical chain, according to three sources with knowledge of the deal who spoke to Mada Masr.

The sources, who spoke on condition of anonymity, said that United began via its management subsidiary, Care Pharmacies, to conduct due diligence on 19011, adding that the size of the stake to be purchased is still undecided and will depend on a valuation of 19011 that is being carried out by two independent financial advisors.

United has also formed an executive committee to inventory 19011’s assets, debts and the value of merchandise currently available in 19011 stores and pharmacies, said the sources.

Though the due diligence process is not yet finished, the executive committee appointed by United has taken peremptory steps to keep 19011 afloat, lending 19011 the liquidity it needs to pay off overdue rents and salaries at its outlets, according to the three sources. The sources added that the committee is also looking into restructuring 19011, and has already taken the decision to lay off hundreds of staff from the security and cosmetics departments as well as to reduce the number of delivery staff.

Even before the layoffs planned by United, 19011 faced a stack of lawsuits filed by former employees who were summarily dismissed when the firm jettisoned staff to offset the costs incurred during its precipitous expansion and collapse over the past four years. The firm has also racked up billions of Egyptian pounds in debt, the sources said.

Pharmaceutical management company 19011, founded by a consortium of seven pharmacists in 2017, captured a place in the press spotlight in 2019 by dint of an explosive expansion. Though it began with just 10 stores in 2017, it doubled the number in a matter of months and continued a trajectory of growth that culminated with its acquiring two of Egypt’s top pharmaceutical chains, AI Image and Roshdy, and collecting over 300 stores.

Just eight months later, creditors began to hound 19011, due to its reliance on high-risk borrowing and a disregard for demand and supply that led to its conducting extensive offloading. Stockists began to refuse to supply 19011 stores and staffers’ salaries were delayed while others were laid off, prompting many workers to demonstrate.

Mohamed Mohie, a former employee of Roshdy Pharmacies stores, which was acquired by 19011, said that management delayed the salaries of workers for over three months, even after he and two of his colleagues filed a complaint with the Labor Office, a body affiliated with the Manpower Ministry, in August 2020. 

19011 managers arbitrarily dismissed Mohie and his two colleagues, he said, who filed and won a lawsuit in January, with the court ruling that 19011 should pay LE35,000 in compensation to all three former employees in January 2021. 

Since 19011 refused to pay out the sum, the court decided to seize some of the company’s property and set a deadline of October 5, by which time the company must either pay the due amount or the property will be sold to raise proceeds to pay the three employees. Lawyer Ahmed Hassan, who is acting on behalf of the three former workers, told Mada Masr that he has also obtained five similar rulings for former 19011 employees pursuing the company for compensation.