Last updated: March 24, 2011 7:29 pm

Walgreen buys Drugstore.com for $409m

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Walgreen, the US drugstore chain, is buying Drugstore.com in a $409m deal that will expand its online retail presence.

Shareholders of Drugstore.com will receive $3.80 in cash for each of their shares, representing a 113 per cent premium above Wednesday’s closing price.

Analysts said the acquisition was intended to help Walgreen compete better against Amazon, which is offering a widening range of products with discounted shipping rates.

Drugstore.com, which launched in 1999 and employs 1,000 workers, had $456m in sales last year and sells more than 60,000 health, beauty and personal care products.

Walgreen, with $67bn annual sales, is looking to expand beyond its brick-and-mortar business and become a more robust e-commerce company.

John Ransom, an analyst at Raymond James, noted that the deal represented little risk for Walgreen since the price was less than 1 per cent of its market capitalisation.

He suggested that the deal would be successful if Walgreen could use Drugstore.com and its websites to drive more traffic to its stores and to push its private label brands.

Walgreen has about 7,700 stores across the US.

Earlier this week Walgreen said that during its second quarter more than half of the prescriptions it refilled were ordered through its mobile app.

“Bricks and mortars are not going to go away, but people are changing the way they shop for everything,” said Patricia Baker, an analyst at Scotia Capital.

The merger is expected to close in June 2011.

Walgreen will also be acquiring Beauty.com, SkinStore.com and VisionDirect.com, which Drugstore.com owns. The websites will continue to maintain their own brands.

“Drugstore.com significantly accelerates our multichannel initiatives by expanding our product selection for our customers,” said Sona Chawla, president of e-commerce at Walgreen.

Thursday’s deal comes after Walgreen sold its health benefits unit to Catalyst Health Solutions earlier this month for $525m in a move to focus on its core pharmacy business.

“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,” Greg Wasson, Walgreen’s chief executive, said.

Shares of Walgreen rose by nearly 0.35 per cent to $39.97 in midday trading in New York.

Credit Suisse Securities advised Walgreen and Allen & Company and Sonenshine Partners advised Drugstore.com.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE