Peoples Drug Stores Inc. announced yesterday it has agreed to buy controlling interest in Haag Drug Co., an Indianapolis-based chain of 80 drug stores.
Peoples will buy 68 percent of the stock of the privately owned company, for an undisclosed amount of cash, said James N. Schwarz, secretary of the Alexandria chain.
The acquisiton will expand Peoples' operation into three new states and will boost both the number of stores it operates and their annual sales by about 20 percent.
The 80 Haag stores had sales of about $80 million last year. Peoples' 399 units reported sales of $404 million and profits of $5.5 million in 1978; for the first 40 weeks of 1979, Peoples' sales were $338 million and earnings were $4.8 million.
Most of the Haag stores are in Indiana, where Peoples has only two units. Haag also has stores in Ohio, where Peoples operates 69 stores under the names Lane and Peoples.
Haag also has stores in Iowa, Illinois and Kentucky, all of which will be new markets for Peoples. The company's territory now covers 10 states and the District of Columbia -- Virginia, Pennsylvania, North Carolina, Alabama, West Virginia and Tennessee.
Schwarz said Peoples plans to purchase the interest in Haag owned by a group of Indianapolis businessmen.
The remaining 32 percent of Haag is controlled by a group of Haag employes headed by Arnold Busse, Haag's chief executive.
Busse could not be reached for comment yesterday; the Peopless spokesman said no agreement has been reached with the employe stockholders over their role in the merged company.
Peoples said the transaction "is subject to the satisfaction of various conditions," but did not disclose what problems had to be worked out before the deal is completed.
One of those problems may be financing the purchase. Peoples's balance sheet last year showed only $3.2 million in cash and indicated the company owed about $21 million to various banks.
Borrowing could be made difficult by the Federal Reserve Board's recently announced tight money policy. Fed Chairman Paul Volcker, in a letter to bank presidents yesterday, urged them not to make loans "for corporate takeovers that simply substitute one source of financing for another and do not clearly promise improvement in economic performance."
Drug store industry sources said the Indianapolis group that controls Haag had been looking for a buyer or merger partner for several months. Merger talks between Haag and Perry Drug Stores Inc. of Pontiac, Mich., were reported earlier this year.