Acquisition spree continues for the leading retail pharmacy
chain,
Walgreen
(
WAG
) as it recently entered into an agreement to acquire a mid-South
US-based regional drugstore chain from Stephen L. LaFrance Holdings
Inc. for $438 million. The deal is expected to close by September
1, 2012.
Per the deal, Walgreen will get hold of a pharmacy chain of 144
stores located in Arkansas, Kansas, Mississippi, Missouri, New
Jersey, Oklahoma and Tennessee. These stores currently operate
under brands like USA Drug, Super D Drug, May's Drug, Med-X and
Drug Warehouse stores.
Walgreen believes that this acquisition will help expand its
business in several key regions of the nation but rules out any
material impact on its fiscal 2012 EPS. This is to note that the
regional drugstore chain delivered sales of $825 million in fiscal
2011.
In order to negate the impact of the
Express Scripts
(
ESRX
) contract loss, Walgreen is currently concentrating on several
strategic steps to drive growth. Two weeks back, the company
entered into a strategic partnership with a global international
pharmacy-led health and beauty group Alliance Boots GmbH to buy 45%
stake in it for $6.7 billion. The company also holds the option to
acquire the remaining stake over the next three years for an
approximate value of $9.5 billion in cash and stock.
Also in May this year, Walgreen completed the acquisition of
certain assets of
BioScrip
's (
BIOS
) community specialty pharmacies and centralized specialty and mail
service pharmacy businesses that include a national network with 30
locations in 16 states across the US and the District of Columbia,
primarily serving HIV, oncology and transplant patients. Walgreen
also acquired certain assets of BioScrip's traditional mail service
pharmacy business that dispenses prescriptions for drugstore.com,
which was acquired by Walgreen in June 2011.
We expect these new ventures of Walgreen to add to the company's
growth going forward. However, time will only show whether all
these initiatives will be able to provide significant cushion or
alleviate the Express Scripts contract related headwinds over a
long-term horizon. Walgreen has also been affected over the past
few quarters by high unemployment levels and lower discretionary
spending.
Currently, Walgreen retains a Zacks #3 Rank (short-term Hold
rating). We have a 'Neutral' recommendation on the stock over the
long term.
BIOSCRIP INC (BIOS): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
Report
WALGREEN CO (WAG): Free Stock Analysis Report
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