A war over drugs has tripped up the pending $1.8 billion merger of Atlanta-based GranCare and Houston-based Living Centers of America.
Manor Care, a competing long-term-care company based in Gaithersburg, Md., and its Vitalink Pharmacy Services of Naperville, Ill., have filed a joint lawsuit against GranCare to enforce a noncompetition agreement the three companies reached in February.
The suit, filed in Delaware Chancery Court, seeks a court order blocking the merger of GranCare and Living Centers.
The complaint says GranCare is prohibited from directly or indirectly owning, joining with or participating in a company in the institutional pharmacy business for three years.
GranCare no longer operates a pharmacy business. In February it sold its institutional pharmacy operations to Vitalink for $370 million in stock and assumed debt, creating the nation's second-largest publicly traded institutional pharmacy.
Vitalink, which is 51% owned by Manor Care, provides medications, consulting, infusion therapy and other ancillary services through 56 institutional pharmacies and four regional infusion pharmacies.
Living Centers operates American Pharmaceutical Services of Naperville, which serves 100,000 nursing home beds. A GranCare spokeswoman said Living Centers' pharmaceutical business "will stay part of the new company going forward."
Manor Care and Vitalink said they plan to ask the court to expedite proceedings so their claims can be heard before the merger is completed in the third quarter.
GranCare said the lawsuit is without merit. It said it has not breached the noncompetition agreement and that the merger with Living Centers will not breach the agreement.