Walgreen Co. (NYSE: WAG) (NASDAQ: WAG) and online retailer
drugstore.com, inc. (NASDAQ: DSCM) today announced a definitive
merger agreement pursuant to which Walgreens will acquire
drugstore.com in a transaction with a total enterprise value of
approximately $409 million.
“Our acquisition of drugstore.com today significantly
accelerates our online strategy to leverage the best community
store network in America by becoming the most convenient choice for
health and daily living needs whether customers shop online or in
our stores,” said Walgreens President and CEO Greg Wasson. “This
acquisition offers a unique opportunity that will provide us
immediate access to more than 3 million savvy, online loyal
customers, and will allow us to move even closer to our existing
customers through relationships with new vendors and partners,
adding approximately 60,000 products to our already strong online
offering. Importantly, drugstore.com’s well-recognized presence in
the health, personal care, beauty and vision categories, including
such strong websites as drugstore.com™, Beauty.com™, SkinStore.com™
and VisionDirect.com™, will complement and extend many of our own
multi-channel initiatives that have been driving growth in our
business. As a result, we are positioned better than ever to be the
most convenient multi-channel retailer of health and daily living
needs in America – offering customers what they want, when they
want it and where they want it.”
Under the terms of the merger agreement, drugstore.com
stockholders will receive $3.80 in cash for each share of stock,
which represents an equity value of approximately $429 million. The
price per share is a premium of approximately 102 percent over
drugstore.com’s 30-day average closing stock price, and a premium
of approximately 113 percent over the closing price of
drugstore.com’s common stock on March 23, 2011, the last trading
day prior to today’s announcement.
Consummation of the merger is subject to customary conditions,
including satisfaction of regulatory requirements and approval of
the transaction by drugstore.com’s stockholders. Walgreens will
fund the acquisition with existing cash and anticipates the merger
will close by the end of June 2011. The definitive agreement was
unanimously approved by drugstore.com’s board of directors, and
drugstore.com’s board recommends that the company’s stockholders
vote in favor of the transaction.
“We believe the acquisition of drugstore.com by Walgreens is a
great fit for all of our constituencies,” said Dawn Lepore,
drugstore.com CEO and Chairman. “drugstore.com benefits from this
transaction by joining the largest and most trusted drugstore chain
in the U.S. Our growth strategies are perfectly aligned, and
Walgreens will be able to accelerate and expand the investments
necessary to achieve our vision and growth opportunities. Our goal
consistently has been to create value for our customers, employees
and shareholders. We believe we have made significant progress over
the last six years and built an organization with a broad and deep
bench of Internet experience. The opportunity to become a part of
Walgreens is the right next step in this journey.”
With more than $456 million in sales in 2010, drugstore.com is
ranked as the eighth-largest e-tailer in the U.S. according to
Internet Retailer magazine. Walgreens will maintain drugstore.com’s
corporate office in Bellevue, Wash., after the transaction is
completed. drugstore.com employs approximately 1,000 people at its
offices, call center and distribution centers.
As a result of the merger, Walgreens will acquire the
drugstore.com website in addition to other websites operated by the
company.
Walgreens President of E-commerce Sona Chawla said, “This is a
very exciting time for the Walgreens e-commerce business as we
expand and build our multi-channel capabilities for a $67 billion
sales company with the best and most convenient store network in
America. drugstore.com significantly accelerates our multi-channel
initiatives by expanding our product selection for our customers,
adding new capabilities through their well-known beauty and skin
care websites, and joining their talented team with our strong and
growing e-commerce organization. Over the past two years, we’ve
established the infrastructure from which to grow our multi-channel
products and services, and by combining drugstore.com’s
capabilities we are well on our way to achieving our goal of
becoming the most convenient multi-channel retailer for health and
daily living needs.”
The transaction is consistent with Walgreens previously outlined
capital allocation objectives, which include investing in strategic
opportunities that reinforce the company’s core strategies and meet
return requirements.
The company anticipates the transaction to be dilutive to
earnings per share in the fourth quarter of fiscal 2011 by
approximately 3 cents due to transaction-related one-time costs.
Based on Walgreens intention to reinvest in the business, the
company further anticipates the transaction to be dilutive to
earnings per share by 3 to 4 cents in fiscal 2012, and 1 to 2 cents
in fiscal 2013. Approximately 1 cent of the anticipated annual
dilution per share is due to the estimated impact of incremental
amortization based on Purchase Accounting assumptions. The company
also anticipates an approximately $80 million present value cash
flow benefit associated with the assumption of drugstore.com’s net
operating losses and other tax related benefits.
drugstore.com will maintain separate branding of its websites
after the transaction closes. Over the long term, Walgreens intends
to enhance its multi-channel product assortment and the overall
customer experience by leveraging drugstore.com’s websites.
drugstore.com was founded in 1998 with a mission to serve the
health, beauty and wellness consumer with selection, convenience,
information and personal service. The web store was launched on
Feb. 24, 1999.
Credit Suisse Securities (USA) LLC acted as financial advisor to
Walgreens in the transaction, and the law firms of Sidley Austin
LLP and Weil Gotshal & Manges LLP served as legal counsel for
Walgreens. Allen & Company LLC and Sonenshine Partners LLC
acted as financial advisors to drugstore.com. The law firm of
Wilson Sonsini Goodrich & Rosati, Professional Corporation
served as legal counsel to drugstore.com.
About Walgreens
Walgreens (www.walgreens.com) is the nation's largest drugstore
chain with fiscal 2010 sales of $67 billion. The company operates
7,689 drugstores in all 50 states, the District of Columbia and
Puerto Rico. Each day, Walgreens provides nearly 6 million
customers the most convenient, multi-channel access to consumer
goods and services and trusted, cost-effective pharmacy, health and
wellness services and advice in communities across America.
Walgreens scope of pharmacy services includes retail, specialty,
infusion, medical facility and mail service, along with respiratory
services. These services improve health outcomes and lower costs
for payers including employers, managed care organizations, health
systems, pharmacy benefit managers and the public sector. Take Care
Health Systems is a Walgreens subsidiary that is the largest and
most comprehensive manager of worksite health centers and in-store
convenient care clinics, with more than 700 locations throughout
the country.
About drugstore.com, inc.
drugstore.com, inc. is a leading online retailer of health,
beauty, clinical skincare, and vision products. Our portfolio of
brands includes: drugstore.com™, Beauty.com™, SkinStore.com™ and
VisionDirect.com™. All provide a convenient, private and
informative shopping experience, while offering a wide assortment
of approximately 60,000 non-prescription products at competitive
prices.
The drugstore.com pharmacy service, in association with BioScrip
Pharmacy Services, Inc., is certified by the National Association
of Boards of Pharmacy (NABP) as a Verified Internet Pharmacy
Practice Site (VIPPS) and complies with federal and state laws and
regulations in the United States.
Additional Information about the Transaction
This press release is not, and is not intended to be, a
solicitation of proxies or an offer of securities. drugstore.com
plans to file with the SEC and mail to its stockholders a Proxy
Statement in connection with the transaction. The Proxy
Statement will contain important information about Walgreens,
drugstore.com, the transaction and related matters. Investors and
security holders are urged to read the Proxy Statement carefully
when it is available. Investors and security holders will be
able to obtain free copies of the Proxy Statement and other
documents filed with the SEC by drugstore.com through the website
maintained by the SEC at www.sec.gov and by contacting
drugstore.com Investor Relations at (212) 331-8424. In addition,
investors and security holders will be able to obtain free copies
of the documents filed with the SEC on drugstore.com’s website at
www.drugstore.com.
Participants in the Acquisition of drugstore.com
drugstore.com and its directors and officers and certain other
members of management and employees may be deemed to be
participants in the solicitation of proxies from its stockholders
in connection with the Transaction. Information regarding these
persons who may, under the rules of the SEC, be considered
participants in the solicitation of drugstore.com’s stockholders in
connection with the proposed transaction will be set forth in the
Proxy Statement described above when it is filed with the SEC.
Additional information regarding drugstore.com’s executive officers
and directors is included in drugstore.com’s definitive proxy
statement, which was filed with the SEC on April 30, 2010. You can
obtain free copies of this document from drugstore.com using the
contact information above.
Forward-Looking Statements
Information set forth in this press release contains
forward-looking statements, which involve a number of risks and
uncertainties. These statements include those regarding the closing
of the transaction and the expected timing thereof and the
potential effects of the acquisition. These statements are not
guarantees of future performance and are subject to risks,
uncertainties and assumptions that could cause actual results to
vary materially from those indicated, including: the ability to
obtain regulatory approvals of the transaction on the proposed
terms and schedule; the failure of drugstore.com’s stockholders to
approve the transaction; the risk that the businesses will not be
integrated successfully; the risk that the cost savings and any
other synergies from the transaction may not be fully realized or
may take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with
customers, employees or suppliers; competition and its effect on
pricing, spending, third-party relationships and revenues; and
other factors described in Walgreens Annual Report on Form 10-K for
the year ended August 31, 2010, drugstore.com’s Annual Report on
Form 10-K for the year ended January 2, 2011 and their respective
subsequent SEC filings, which risks and uncertainties are
incorporated herein by reference. You are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Except to the extent
required by law, Walgreens and drugstore.com disclaim any
obligation to update any forward-looking statements after the
distribution of this press release, whether as a result of new
information, future events, changes in assumptions, or
otherwise.
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