In a bid to boost its business in North Carolina,
) inked a definitive agreement to acquire certain assets of
privately owned regional pharmacy chain Kerr Drug, including 76
retail drugstores and specialty pharmacy business. The
acquisition also includes a distribution center.
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Although the financial terms of the acquisition agreement remain
undisclosed, Walgreens will take over Kerr Drug's said business
in an asset transaction. The company expects to close the
acquisition by the end of 2013, subject to standard closing
conditions and regulatory approval.
According to Walgreens, the acquisition will be immaterial to
earnings per share in fiscal 2014. Meanwhile, the acquisition
will seamlessly strengthen the company's foothold in Southeastern
U.S. as North Carolina (the market which Kerr Drug serves)
represents one of the fastest growing markets in the country.
Kerr Drug's specialty pharmacy and retail drugstores declared
sales of $381 million in fiscal 2012. Walgreens and Kerr Drug
will continue to conduct business separately until the closure of
the acquisition. Additionally, Kerr Drug's long-term care
pharmacy business has been excluded from the acquisition deal.
While we look forward to the integration of the acquired business
with Walgreens' operations, Kerr Drug will continue to serve
customers with its current brand name in the near term
post-acquisition. As an industry forerunner, Walgreens is
perfectly positioned to grow Kerr Drug's market reach and improve
patient access. The company also plans to reconstruct the role of
community pharmacy services in the healthcare industry.
Of late, Walgreens has pursued acquisitions and deals to grow its
business in the domestic market and abroad. The intent to
takeover Kerr Drugs is another means to maintain its industry
leadership among other retail drugstores in the U.S. Walgreens
should generate more customer traffic as it looks to expanding
its foothold in the lucrative North Carolina region that covers
15 metropolitan areas.
The inclusion of Kerr Drug's specialty pharmacy business in
Walgreens' operations is another upside. In the drug retail
space, specialty pharmacy represents another high-growth avenue.
The soaring demand for specialty pharmacy, especially in the
ongoing decade, is likely to accelerate growth for the company.
Although Walgreens continues to face challenges in the U.S., the
drugstore chain should benefit from demographic tailwinds and the
generic wave in the pharmaceutical industry. Currently, the stock
carries a Zacks Rank #3 (Hold).
While we remain on the sidelines for Walgreens, other drug
Rite Aid Corporation
GNC Holdings Inc
) are worth considering. These stocks carry Zacks Rank #2