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Walgreens to buy drugstore.com for $409M
March 24th, 2011
DEERFIELD, Ill. – In a move to expand its e-commerce business and expertise, Walgreen Co. plans to acquire drugstore.com in a deal valued at $409 million.
Walgreens said Thursday that under the agreement, it will acquire the drugstore.com web site plus the online retailer's extensive roster of microsites, led by Beauty.com.
Plans call for drugstore.com to maintain separate branding of its web sites after the deal closes, and Walgreens said it will keep drugstore.com's corporate headquarters in Bellevue, Wash. The online retailer employs about 1,000 people at its offices, call center and distribution centers.
In 2010, drugstore.com had sales of nearly $457 million, making it the nation's 46th largest online retailer and eighth-largest e-tailer, according to Internet Retailer magazine.
"Our acquisition of drugstore.com 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," stated Greg Wasson, president and chief executive officer of Walgreens, the nation's largest drug chain with nearly 7,700 stores.
"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 explained. "Importantly, drugstore.com's well-recognized presence in the health, personal care, beauty and vision categories — including such strong web sites as drugstore.com, 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."
Walgreens said the transaction, which it will fund with existing cash, is expected to close by the end of June. The agreement calls for drugstore.com stockholders to receive $3.80 in cash for each share of common stock. That represents an equity value of about $429 million and a share price premium of about 102% over drugstore.com's 30-day average closing price and 113% over the $1.79 closing price on March 23, the last trading day before the acquisition announcement.
"We believe the acquisition of drugstore.com by Walgreens is a great fit for all of our constituencies," stated Dawn Lepore, drugstore.com's chairman and CEO. "Drugstore.com benefits from this transaction by joining the largest and most trusted drug store 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."
Walgreens noted that it aims to enhance its multichannel product assortment and the overall customer experience by leveraging drugstore.com's family of online stores, which besides its namesake site and Beauty.com include VisionDirect.com, SkinStore.com, SexualWellBeing.com, AtHisBest.com (for men), TheNaturalStore.com, AllergySuperstore.com and VitaminEmporium.com.
"This is a very exciting time for the Walgreens e-commerce business as we expand and build our multichannel capabilities for a $67 billion sales company with the best and most convenient store network in America," commented Sona Chawla, president of e-commerce at Walgreens.
"Drugstore.com significantly accelerates our multichannel initiatives by expanding our product selection for our customers, adding new capabilities through their well-known beauty and skin care web sites, and joining their talented team with our strong and growing e-commerce organization," Chawla stated. "Over the past two years, we've established the infrastructure from which to grow our multichannel 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 multichannel retailer for health and daily living needs."