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Walgreens wraps up Duane Reade acquisition
April 9th, 2010
Outside New York City, Duane Reade has stores in New Jersey and New York's Long Island.
DEERFIELD, Ill. – Walgreen Co. has completed its acquisition of Duane Reade Holdings Inc. and shed some light on its integration of the New York drug store chain.
Walgreens said Friday that the transaction includes all 258 Duane Reade stores in the New York metropolitan area as well as Duane Reade's corporate office and two distribution centers.
The companies announced the nearly $1.1 billion agreement in mid-February. Walgreens reported at the end of March that the Federal Trade Commission had cleared the deal and that it expected to finalize the acquisition by the middle of this month.
Plans call for Walgreens to continue operating Duane Reade under its brand name. Walgreens currently has 70 stores in New York City, and about 60% of Duane Reade's locations are in the borough of Manhattan, where Walgreens has 13 stores.
Though its main presence is in New York City's five boroughs, Duane Reade also has eight stores on New York's Long Island and 10 stores in New Jersey.
Walgreens said Friday that it "will consider the most effective way to harmonize both brands over time."
John Spina, vice president of retail integration and new format development at Walgreens, will continue to oversee the Duane Reade integration process as he has since the acquisition was announced, the Deerfield, Ill.-based pharmacy chain said. Spina's responsibility for leading Walgreens' Rewiring for Growth efficiency initiative was recently transitioned to Don Huonker, senior vice president of health care innovation.
Spina will work closely with Duane Reade chairman and chief executive officer John Lederer, who will continue to direct Duane Reade operations, according to Walgreens.
"In the coming months, we will begin to incorporate some positive changes into our model," Lederer said in a letter to customers on the Duane Reade web site. "The changes will benefit Duane Reade customers, particularly in the pharmacy, which will gain from the expertise by the leading community pharmacy network in the country. You may also notice some improved service and product offerings as we begin work with Walgreens on further enhancing the urban customer experience. That said, you can continue to count on us for the Duane Reade products and services that you have come to expect and appreciate."
Below Lederer's letter on the Duane Reade web site, a frequently asked questions section said plans calls for customers to eventually be able to transfer prescriptions from Walgreens to Duane Reade and visa versa. For now, Duane Reade customers can get their prescriptions filled at Walgreens with a telephone transfer, and Walgreens customers who would like to have their prescriptions filled at Duane Reade can do the same.
With Duane Reade in the fold, Walgreens now has about 7,440 stores.
"Just as Walgreens has been a trusted community pharmacy for more than 100 years, we plan for Duane Reade to continue as the leading drug store that millions of New Yorkers rely upon," Walgreens president and CEO Greg Wasson said in a statement. "By combining the strengths of our two companies, we can improve our position as the most convenient provider of consumer goods and services and pharmacy, health and wellness services in the country."
Walgreens added that it intends to promptly repay or redeem outstanding debt of Duane Reade and its affiliates related to its credit agreement dated July 21, 2003; its 9.75% senior subordinated notes due 2011; its 11.75% senior secured notes due 2015; and its senior convertible notes due 2022.
Duane Reade reported last month that at the end of its 2009 fiscal year on Dec. 26, its total debt — including capital leases but excluding liability associated with the issuance of redeemable preferred stock — stood at $458.2 million, down $97.5 million from the end of fiscal 2008. The company said the decrease mainly stems from debt refinancing transactions completed in the 2009 third quarter.