Walgreens to acquire online retailer drugstore.com, inc. for USD 409 million

Walgreen Co. and online retailer drugstore.com, inc. announced a definitive merger agreement pursuant to which Walgreens will acquire drugstore.com in a transaction with a total enterprise value of approximately USD 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 USD 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.
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.

About Walgreens

Walgreens is the nations 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.