Just over two years ago, Neighbourly Pharmacy (TSX: NBLY) went public at $17/share.
Their valuation post-IPO puzzled me given the relatively simple nature of the business (retail pharmacy consolidator) and especially given the competitive landscape (you’re competing against Loblaws a.k.a. Shopper’s Drug Mart, Rexall, and the like). So while I kept a corner of one eye in the stock, I was never really interested.
The balance sheet also traded like a serial acquirer – tangible networth was negative, and financial metrics weren’t that great in relation to valuation despite posting quite healthy “adjusted EBITDA” numbers. They had lease liabilities as one might expect from a retail pharmacy operation. More relevantly, they had a couple hundred million in debt which wasn’t over-leveraged but wasn’t exactly confidence-inspiring given the interest rate environment (the loan was at BA-plus and termed to May 2026).
However, in the past few months, the stock really started to trade down to a point where I was getting interested.
They got as low as $12.05/share yesterday before today morning their 50% shareholder decided to just say ‘screw it’ and put in an offer to buy the remaining half and go private for $20.50/share. It is very likely the offer will be accepted by the remaining shareholders. They would be stupid not to.
It’s too bad considering that my own pen-and-paper valuation would have started buying them below $10/share (about 5 times EBITDA). Sort of got close, but not quite.
The analogy here is like a leopard or cheetah stalking in tall grass looking at a target and waiting for the right moment to pounce, but in this case the prey got away before they even got to the point where they were close. There will be other opportunities ahead but there is always this feeling of regret when you put some of your most valuable commodity (time and brainpower) into something that doesn’t come to fruition.
Have you looked at Dental Corp? Havent done a deep dive yet but seems the set up could be similar.