A Walgreen’s employee talks to a customer about a flu shots in Manhattan. (AP Photo/Yanina Manolova, file)
| By Bruce Japsen and Sandra M. Jones | Walgreen Co is buying regional drugstore operator Duane Reade Holdings Inc, New York City’s biggest pharmacy chain, in a move that fulfills Walgreen’s longstanding ambition to dominate the nation’s largest metropolitan market. The Deerfield-based drug store giant agreed to acquire Duane Reade from private equity firm Oak Hill Capital Partners in a deal valued at $1.075 billion. The purchase price includes $618 million in cash and the assumption of $457 million in Duane Reade debt. |
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The move marks the biggest acquisition in the history of 109-year-old Walgreens, which for most of its corporate life expanded by building its own stores rather than buying rivals.
“Site development is complex and time consuming, especially in urban areas,” said Walgreen CEO and President Greg Wasson during a conference call with analysts. “And one thing we’ve learned is it would take many years of organic growth to reach the store count that this acquisition brings us.”
Walgreen operates just 70 stores in the greater New York area—a tiny fraction of its 7,162 stores nationwide. It opened a showcase store in Manhattan’s Times Square in 2008 and a store in Brooklyn last year.
With Duane Reed, Walgreen gains 257 stores in one swoop, along with the corporate office and two distribution centers. About 60 percent of Duane Reade’s stores are in Manhattan and 30 percent are in the four other buroughs of New York City. The rest are outside the city.
The New York pharmacy gives Walgreen a foothold for expanding in the Northeast, where rival CVS holds sway.
Duane Reade Chairman and CEO John Lederer said he sees a “tremendous opportunity” for Walgreen to boost Duane Reade’s pharmacy business, currently at 47 percent of total sales. Walgreen, for its part, generates two-thirds of its revenue from prescriptions sales.
Duane Reade had $1.8 billion in annual sales last year. Walgreen had $63 billion in fiscal 2009 sales.
The combination is slated to save $120 million to $130 million annually within the first three years of the acquisition, with most of the cost savings coming from consolidating purchasing and overhead.
The purchase, expected to close by Aug. 31, will dilute earnings by 10 cents a share in the first 12 months after closing, said Wade Miquelon, Walgreen’s chief financial officer. Walgreen plans to fund the acquisition from the $3 billion it has in cash and to refinance Duane Reade’s debt.
Duane Reade, founded in 1960, will continue to operate under its brand name after the transaction closes.
Oh mai! I’ve always wondered how Walgreens expected to break into the NYC market. Now I see it clearly…
Walgreen’s-but the stock, re-invest the dividends, contemplate your navel-wealth the American way…
increasing their monopolization of the pharmacy business and decreasing healthy competition. way to go US of A
When I visited New York a few years, I went to a Duane Reade drug store for a few items. I knew then that Walgreens and CVS will buy them out. Even New Yorkers knew the day was coming, once CVS starting putting stores in New York.
New Yorkers won’t like this, but for those of us who travel in from out of town, it will make getting prescriptions *much* easier.
The stores are very similar, although I did boycott Duane Reade for a year after a store manager refused to take my $10 bill, thinking it was a fake. Who counterfeits tens?
I can see why this employee has to explain it to the fella in the photo. If he took his sunglasses off he’d be able to read the instructions himself. Too cool for school.
@rza …really? WAG monopolizes the pharmacy business? How do you figure? If you include the DR acquisition, WAG has about 7,300 stores in the US and Puerto Rico. If you look at all available pharmacies (CVS, Rite Aid, Target, WalMart, etc), there’s almost 70,000 in the “US of A”.
Last I checked, 10% does not a monopoly make.
Wow! Duane must be one fantastic brutha!
Hope thr dude is buying something for his hair
I have been waiting for Walgreens to sell beer and wine like CVS.
@david wayne …
http://www.chicagotribune.com/business/chi-biz-walgreens-liquor-jan27,0,2764393.story
You shouldn’t have to wait too much longer. And it’ll be in more than 18 stores around Chicago. More like …most of them.
In other news Jewel Osco terminates 110 of their drug store managers eliminating almost all of them leaving the grocery manager to run the pharmacy. Wow.
I have had a Natwest business account for almost 2 years and to date things have gone well, however more recently i have had to wait for my customers to pay me which has meant i have sail very close to the mark, and in the middle of November I went into the red over a 9 day period with 3 transactions being paid tacking me ?57 into the red, (1st Time in nearly 2 Years.
Heyo! Been a while since I’ve been back, good to be back!
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