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Walgreens Acquires Familymeds Pharmacies

Walgreens Acquires Familymeds Pharmacies. Matt Thompson Stu Beurskens. About Walgreens. Founded in 1901 Retail drugstore chain that deals primarily in the sale of prescription and non-prescription drugs As of August 31, 2006 Walgreens operated 5,461 stores in 47 states and Puerto Rico

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Walgreens Acquires Familymeds Pharmacies

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  1. Walgreens Acquires Familymeds Pharmacies Matt Thompson Stu Beurskens

  2. About Walgreens • Founded in 1901 • Retail drugstore chain that deals primarily in the sale of prescription and non-prescription drugs • As of August 31, 2006 Walgreens operated 5,461 stores in 47 states and Puerto Rico • Walgreens currently employs more than 195,000 people

  3. Walgreens’ Current Financials *The top chart displays Walgreens’ current year end numbers for FY 2006. The subsequent chart represents Walgreens’ top 3 competitors and the margins Walgreens holds on each.

  4. Competitors’ Financials

  5. Current Growth Strategy • Walgreens’ is currently looking to expand to 7,000 stores nationwide by 2010 • In 2007, Walgreens plans to add 500 stores (netting 400 after closures and moves) • Current growth targets are California, North Carolina, Florida, Texas and the state of New York

  6. Walgreens Acquisition • Reached an agreement to acquire select assets of FamilyMeds Group Inc. • Walgreens is acquiring the assets (53 pharmacies in 11 states) for approximately $60 million, in addition to assuming certain real estate leases • Other national and regional pharmacies will buy the remaining locations for $19 million

  7. Hostile Takeover? • "I am excited that Walgreens shares our vision of excellence in customer care, intends to grow our clinic and Worksite Pharmacy models and will be offering positions to our associates*.” • Unlike some of the cases we have gone over in this class, both sides of this transaction feel it is in their respective company’s best interest. *Quote of Ed Mercadante, Chairman & CEO of FamilyMeds

  8. Industry Leaders

  9. Future of the Company • The chart to the right represents the current and forecasted growth rates for Walgreens and the Drug Store Industry as a whole. *Growth rate estimates were taken from Yahoo Finance

  10. Walgreens’ PVGO • Walgreens is extremely focused on maintaining the growth of their company. The following statistics were taken from Yahoo! Finance: • ROE: 19.07% • Payout Ratio: 16% • Current Stock Price: $46.01 • DIV1: $0.31 • EPS1: 2.03 • What is the PVGO as a % of Walgreens’ stock price? *Assume constant growth rates

  11. Answer • A) 50.2% • B) 65.8% • C) 73.6% • D) 82.1% • E) I Don’t Know

  12. Stu and Matt’s Forecast • After an initial expected rise in Walgreens’ stock price, we feel it is too early to make an accurate prediction • However, based on past success, current financials and expected growth rates, we feel Walgreens will remain an industry leader for years to come

  13. Questions?

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