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Mergers and Acquisitions
Wed June 1, 2011
Soon to be official: Walgreens' acquisition of Drugstore.com
The online-retailer is being acquired by its biggest brick and mortar competitor: Illinois-based Walgreens.
Drugstore.com has survived despite carrying huge debt for years. A decade ago, many Seattle-area internet companies that looked a lot like it (rx.com, mercata.com) became the butt of jokes about "dot-cons" and the big "dot-bust." But some also soldiered on.
Even though it's been saddled with debt, and currently has the highest Debt/EBITA of any internet retailer out there, Bellevue-based drugstore.com has survived for 13 years. Last year it refused two offers from Walgreens, holding out for the higher price it finally netted in March.
"It's a deal valued at just over 400-million dollars and we expect to close on it sometime in June," says Walgreens spokesman Michael Polzin, explaining that a big part of the motivation for the acquisition is the Bellevue-based e-tailer's catchy internet address.
Drugstore.com, which sells everything you normally find on the shelves of a big pharmacy, also comes with partner sites beauty.com and skinstore.com.
The deal now just needs shareholders to sign off. Many of them are employees. Polzin says they don't need to worry about losing their jobs because of the merger.
"The intention is to create combined sales synergies, not cost synergies. So, this deal was not done to reduce costs, but really to generate even more sales as a combined entity."
Shareholders will get three dollars eighty cents $3.80 per share if they approve the deal – a penny more than Wednesday's closing price on the stock market.
It's a far cry from the $65 dollars a share of its IPO in the summer of 1999, but both companies say the merger will bring investors better returns in the future.
Walgreen's is the nation's largest drugstore chain. The cpmpany says it has more than 7,700 locations in all 50 of the United States, Washington DC and Puerto Rico. It was founded in Chicago in 1901. Last year, it acquired Duane Reed stores in New York in a deal worth $1.09-billion.
Drugstore.com has about 950 employees, with about 250 of those based in Bellevue. The rest are at a distribution center in New Jersey, a call center in Nova Scotia and administrative offices in Sacramento.