DEERFIELD, Ill. — Walgreen Co. said Thursday it would acquire e-tailer drugstore.com for approximately $409 million.
The acquisition strengthens Walgreens' position as a "convenient multi-channel retailer of health and daily living needs." It will give the drug retailer access to more than 3 million online customers and add some 60,000 products in health, personal care, beauty and vision categories. Besides drugstore.com, other company websites in the acquisition are Beauty.com, SkinStore.com and VisionDirect.com.
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% over drugstore.com’s 30-day average closing stock price, and a premium of approximately 113% over the closing price of drugstore.com’s common stock on March 23, 2011, the last trading day prior to Thursday’s announcement.
The company anticipates the transaction to be dilutive to earnings per share in the fourth quarter of fiscal 2011 by approximately 3 cents due to transaction-related one-time costs. Based on Walgreens intention to reinvest in the business, the company further anticipates the transaction to be dilutive to earnings per share by 3 to 4 cents in fiscal 2012, and 1 to 2 cents in fiscal 2013.
In a research report, Hapoalim Securities senior analyst Ajay Jain wrote: "We've lowered our estimates by $0.03 per share for both FY11 and FY12. The transaction is somewhat surprising, in our view, based on high premium for DSCM as well as the dilution from the transaction (which is expected to continue through FY13)." He went on to say that the transaction reflects a growing appetite by Walgreens to use existing cash on its balance sheet for strategic acquisitions. "While we don’t expect the acquisition to be a game changer for WAG over the foreseeable future, the strategic benefits of buying an established online retailer could be meaningful."
The deal, expected to close in June, is subject to customary conditions, including satisfaction of regulatory requirements and approval of the transaction by drugstore.com’s stockholders.
Walgreens will maintain separate branding of its webites and drugstore.com's corporate office in Bellevue, Wash., after the transaction is completed.
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.
With more than $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.