A €50 MILLION takeover deal involving one of the State’s biggest pharmacy chains is not going ahead after a dispute forced the parties into arbitration a number of weeks ago.

Three years ago, Sam McCauley Chemists, which operates a chain of pharmacies across the south-east and south, approached a smaller rival, owned by Adrian Dunne, to discuss a takeover valued at €50 million.

Following due diligence, the initiative did not go ahead and the matter eventually wound up in formal arbitration at the end of June. It is understood that those proceedings have since ended and that the McCauley group’s takeover of the Dunne business is not going to go ahead.

Neither party has commented on the outcome. Formal arbitration proceedings are heard behind closed doors and parties generally agree that any resolution reached should remain confidential.

The Dunne group originally wanted the takeover to proceed but the intended purchaser refused and may have made a counter claim of its own.

Businesses increasingly favour formal arbitration as a means of resolving disputes as it allows them to avoid airing normally confidential and commercially sensitive information in open court.

The proceedings are “quasi judicial” which means that one person, frequently a lawyer, hears submissions both sides and then makes a ruling based on that.

Earlier this week, it emerged that Sam McCauley Chemists had operating profits of €7.5 million last year, a 45 per cent increase on 2008, when it earned a surplus of €5.2 million.

The group’s revenues were largely flat at €84.76 million and the operating profit growth came about largely as a result of a sharp fall in costs. Its net assets were close to €27 million.

Businessman Sam McCauley and his family own the group, which has its headquarters in Wexford and employs 564 people. It owns pharmacies mainly around the southeast, south and southwest of the country, but also has a presence on the outskirts of Dublin.

The Dunne group, which Mr Dunne controls through a holding company, D M Pharmacies, also owns a number of the properties that house its shops. It has outlets in Dublin, Kildare and Meath and Portarlington, Co Laois, where it has two chemist shops. The business employs 140 people.

The McCauley group does not have a presence in these areas. It is thought that this was one of the reasons that the smaller chain was attractive to the Wexford business.

D M’s 2008 balance sheet valued its subsidiaries, the group’s chemists shops, at €31 million, which was in line with 2007, the year in which the McCauley deal was done. The value of retail businesses – and properties – has fallen sharply since then.