Walgreens boosts online presence with Drugstore.com acquisition

Transaction expected to close by end of June

DEERFIELD, Ill., and BELLEVUE, Wash. — Shortly after posting record second-quarter sales on Tuesday, Walgreens announced that it would "accelerate its online strategy" by acquiring e-retailer Drugstore.com for about $429 million, subject to customary conditions.

“Our acquisition of Drugstore.com 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,” Walgreens president and CEO Greg Wasson said.

“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," Wasson added.

Under the agreement, Drugstore.com stockholders will receive $3.80 in cash for each share of stock, representing a total of about $429 million; a price about $27 million less than the online retailer's 2010 U.S. sales, according to Online Retailer. The price per share, Walgreens noted, is a premium of about 102% over Drugstore.com’s 30-day average closing stock price, and a premium of approximately 113% over the closing price of Drugstore.com’s common stock on March 23, the last trading day prior to the announcement.

Walgreens noted that the deal is subject to customary conditions, and expects the acquisition to close by the end of June.

Earlier this month, the drug store chain announced it would sell off to Catalyst Health Solutions its pharmacy benefit management business — which carried a price tag of about $525 million in cash — to focus on core strategies.

Snapping up Drugstore.com and its assets — which include the namesake site, along with Beauty.com, SkinStore.com and VisionDirect.com — will "complement and extend many of our own multichannel initiatives that have been driving growth in our business," Wasson said. "As a result, we are positioned better than ever to be the most convenient multichannel retailer of health and daily living needs in America — offering customers what they want, when they want it and where they want it.”

Drugstore.com's board of directors unanimously approved the definitive agreement. Dawn Lepore, Drugstore.com CEO and chairman, said that the company's growth strategy was perfectly aligned with Walgreens', and that she was confident that the drug store chain would achieve Drugstore.com's vision and growth opportunities.

“We believe the acquisition of Drugstore.com by Walgreens is a great fit for all of our constituencies,” Lepore said. “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.”

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