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8-K - WALGREEN CO. 8-K - WALGREEN CO | walgreen_8k.htm |
News
From
|
Walgreen
Co. Corporate Communications l 200 Wilmot Road l Deerfield, Ill.
60015 l (847)
914-2500
Contact: | For Walgreens
Jim
Cohn
(847)
914-2950
jim.cohn@walgreens.com
|
For Duane
Reade
Caren Villarreal
(212) 273-5772
villarrc@duanereade.com
|
FOR IMMEDIATE RELEASE |
http://news.walgreens.com
www.duanereade.com
|
Walgreens
to Acquire New York-based Drugstore Chain Duane Reade
·
|
Acquisition
gives Walgreens leadership position in nation’s largest retail and
drugstore market
|
·
|
Duane
Reade to continue brand identity while accelerating Walgreens Customer
Centric Retailing initiative in urban
markets
|
DEERFIELD,
Ill., Feb. 17, 2010 – Walgreen Co. (NYSE, 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
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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
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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 décor; 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
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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
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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.
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