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DEERFIELD, Ill.(BUSINESS WIRE)
Walgreen Co. (NYSE: WAG)(NASDAQ: WAG):
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Acquisition gives Walgreens leadership position in nation's largest
retail and drugstore market
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Duane Reade to continue brand identity while accelerating Walgreens
Customer Centric Retailing initiative in urban markets
Walgreen Co. (NYSE: WAG)(NASDAQ: WAG) and New York-based drugstore chain
Duane Reade Holdings, Inc. today announced a definitive agreement under
which Walgreens will acquire Duane Reade from affiliates of Oak Hill
Capital Partners in a cash transaction for a total enterprise value of
$1.075 billion, which includes the assumption of debt.
The transaction is subject to customary conditions, including receiving
regulatory approvals and would include all 257 Duane Reade stores
located in the New York City metropolitan area, as well as the corporate
office and two distribution centers. Walgreens will fund the purchase
with existing cash and anticipates the transaction will close in its
current fiscal year, which ends Aug. 31.
Duane Reade is a compelling strategic acquisition that will immediately
provide Walgreens with a leading position in the largest drugstore
market in the U.S.,? said Walgreens President and CEO Greg Wasson. In
addition, Duane Reade's recent initiatives in urban retailing, customer
loyalty and private brand products support and accelerate Walgreens
strategy to enhance the customer experience in our network of more than
7,100 stores across the country.?
Duane Reade had unaudited net sales of $1.8 billion for the latest
12-month period ending Dec. 26, 2009, and has the highest sales per
square foot in the retail drugstore industry nationwide.
This transaction is consistent with the capital allocation objectives
we outlined last fall, which included investing in strategic
opportunities that reinforce the company's core strategies and meet
return requirements,? said Wasson. By combining the strengths of our
two companies, we can improve our position as the most convenient
provider of consumer goods and services, and pharmacy, health and
wellness services in the country.?
The company anticipates the transaction to be dilutive to earnings per
share in the first 12 months after closing, and accretive in the next 12
months and beyond. Walgreens expects to achieve synergies between
$120-$130 million in the third year after closing the transaction.
Additionally, the company will benefit from Duane Reade's existing net
operating losses which will provide additional value over time.
We are very pleased that this national leader has recognized the
successful transformation under way at Duane Reade, which is built upon
a 50-year history of serving the needs of New Yorkers and has been
supported by our shareholders, including Oak Hill Capital Partners,?
said Duane Reade Chairman and CEO John A. Lederer. We will continue to
be the drugstore New Yorkers turn to, just as Walgreens has been a
trusted community pharmacy in other markets for more than 100 years.?
Duane Reade will continue to operate under its brand name after the
transaction closes. With Walgreens currently operating 70 stores in the
New York City metropolitan area, decisions will be made over time as to
the best, most effective way to harmonize the Walgreens and Duane Reade
brands. Walgreens expects to retain Duane Reade's store, pharmacy and
distribution center employees and many members of Duane Reade's senior
management team following the acquisition. Over time, consolidation of
core functions at the corporate offices will occur.
Duane Reade, which opened in 1960 and is named after its first store
located on Broadway between Duane and Reade streets in Manhattan, is the
largest drugstore chain in the New York City metropolitan area. Over the
past two years, Duane Reade has embarked upon a significant brand
transformation initiative based upon extensive market research.
Improvements include: dramatic new store designs with wide aisles and
contemporary dcor; a much improved pharmacy featuring lower service
counters for more personalized patient interaction; introduction of
Doctor on Premises? walk-in health care; and a store-within-a-store
prestige beauty concept called Look Boutique,? which elevates the
merchandising of cosmetics and skin care products and features many
prestige beauty brands. Positive changes also include the launch of a
family of exciting new private brands including food and beverage brand
DR Delish?; and a much expanded customer loyalty program called
FlexRewards?.
To date, Duane Reade has opened or converted 30 stores to the new format
and has plans for up to 30 more new or remodeled stores in 2010. The
continued rollout of Look Boutique? is also planned for a growing
number of stores across the network.
Duane Reade's transformation initiatives correspond to Walgreens current
Customer Centric Retailing (CCR) initiative to reinvent the shopping
experience. To date, CCR has been implemented in more than 600 Walgreens
stores nationwide, with plans to have as many as 3,000 stores converted
by the end of fall 2010.
Lederer said, We are pleased that Walgreens shares our commitment to
finding new and innovative ways to serve local communities, and we look
forward to seeing our customers benefit from Walgreens unparalleled
pharmacy and operational expertise as we continue with our ongoing
transformation.? Duane Reade plans to continue accepting all of its
current prescription insurance plans after the transaction closes.
Peter J. Solomon Co. acted as financial advisor to Walgreens in the
transaction, and the law firm of Wachtell, Lipton, Rosen & Katz served
as legal counsel for Walgreens. Goldman Sachs & Co. acted as lead
financial advisor, and Bank of America Merrill Lynch acted as
co-financial advisor to Oak Hill Capital Partners and Duane Reade. The
law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal
counsel to Duane Reade and its shareholders, including Oak Hill Capital
Partners.
Walgreens will host a public conference call/webcast today at 8:30 a.m.
eastern time, during which Walgreens executive management will discuss
the acquisition. Speaking on behalf of Walgreens will be President and
CEO Greg Wasson and Executive Vice President and CFO Wade Miquelon.
Speaking on behalf of Duane Reade will be Chairman and CEO John A.
Lederer. A question and answer session with analysts and investors will
follow. The live audio webcast will be available at http://investor.walgreens.com.
A rebroadcast will be available from 11:30 eastern time today through
Feb. 26 at 888-203-1112 or 719-457-0820, using passcode 5104299.
About Walgreens
Walgreens (www.walgreens.com)
is the nation's largest drugstore chain with fiscal 2009 sales of $63
billion. The company operates 7,162 drugstores in all 50 states, the
District of Columbia and Puerto Rico. Walgreens provides the most
convenient access to consumer goods and services and cost-effective
pharmacy, health and wellness services in America through its retail
drugstores, Walgreens Health Services division and Walgreens Health and
Wellness division. Walgreens Health Services assists pharmacy patients
and prescription drug and medical plans through Walgreens Health
Initiatives Inc. (a pharmacy benefit manager), Walgreens Mail Service
Inc., Walgreens Home Care Inc., Walgreens Specialty Pharmacy LLC and
Walgreens Long-Term Care Pharmacy LLC. Walgreens Health and Wellness
Division includes Take Care Health Systems, the largest and most
comprehensive manager of worksite health and wellness centers and
in-store convenient care clinics, with more than 700 locations
throughout the country.
About Duane Reade, Inc.
Founded in 1960, Duane Reade is the largest drugstore chain in New York
City. In keeping with the company's brand vision of New York Living Made
Easy, Duane Reade provides New Yorkers with prescriptions, health
products and services, beauty products and services, and food and
convenience items for daily life in the City? everything for How I
Feel,? How I Look? and What I Need Now.? The company operates 257
stores throughout the metropolitan New York City region.
For Walgreens
Jim Cohn
(847) 914-2950
jim.cohn@walgreens.com
http://news.walgreens.com
or
For
Duane Reade
Caren Villarreal
(212) 273-5772
villarrc@duanereade.com
www.duanereade.com
Source: Walgreens
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