Walgreens Takes Manhattan and Other NYC Boroughs, Too
Walgreens announced yesterday that it had signed an agreement
to acquire privately-held Duane Reade from Oak Hill Capital Partners in a
cash transaction valued at $1.075 billion.
With 257 locations in the New York metro area, Duane Reade is the largest
drugstore chain in the city. Walgreens currently operates 70 Big Apple locations.
"Duane Reade is a compelling strategic acquisition
that will immediately provide Walgreens with a leading position in the largest
drugstore market in the U.S.," said Greg Wasson, president and CEO of Walgreens,
in a press release. "In addition, Duane Reade’s recent initiatives in urban
retailing, customer loyalty and private brand products support and accelerate
Walgreens’ strategy to enhance the customer experience in our network of
more than 7,100 stores across the country."
Walgreens plans to continue operating stores under the Duane Reade banner
at least initially after the deal closes. “With
Walgreens currently operating 70 stores in the New York City metropolitan area,
decisions will be made over time as to the best, most effective way to harmonize
the Walgreens and Duane Reade brands,” read the press release.
Duane Reade has undertaken a major initiative over the past couple of years
to remodel stores, launch a beverage and food line under the Dr. Delish label
and better serve customers with its FlexRewards program. The chain has also
had some success with in-store clinics manned by doctors instead of the nurse
practitioners found in Walgreens’ Take Care sites.
The Duane Reade deal follows other recent moves by Walgreens to build its
numbers through acquisitions. The company recently completed deals to acquire
chains including Eaton Apothecary in Boston and Drug Fair in New Jersey. It
is also in the process of finalizing a takeover of the Snyder’s chain in Minnesota.
Walgreens’ expansion through acquisition continues a trend
in the drugstore channel seen for many years. The chain’s primary competitor,
CVS Caremark, has achieved major store count gains by purchasing Longs Drug
Stores (2008) and Eckerd (2004). The struggling Rite Aid chain has also gone
the merger route to grow store count.
A piece by Dow Jones Newswires suggested that further acquisitions
of regional chains are likely to happen in the next couple of years. Among
those chains considered most likely to be acquired include Kinney Drugs, Kerr
Drug and USA Drug.
Discussion Questions: What is your
reaction to Walgreens’ purchase of Duane Reade? Separately, do you have
any concerns about the effects of consolidation in the drugstore channel?
- Largest U.S. pharmacy deals since 1990 – Reuters
- Walgreens to Acquire New York-based Drugstore Chain Duane Reade – Walgreen
- More Regional Drug-Store Deals Seen After Walgreen’s Duane Reade Buy – Dow
Jones/The Wall Street Journal