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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
Walgreens currently employs more than 195,000 people
Walgreens’ Current Financials
Revenues Net Income Total Assets Market Cap
Walgreen Co. $47,409,000,000 $1,750,600,000 $17,131,100,000 $46,048,085,790
Medco HealthSolutions, Inc. 20% 66% 20% 61%
CVS Corp. (DE) 22% 30% 11% 41%
Caremark Rx, Inc. 30% 47% 25% 41%
*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.
Competitors’ Financials
Revenues Net Income Total Assets Market Cap
Medco Health Solutions, Inc.
$37,870,900,000 $602,000,000 $13,703,000,000 $18,031,004,841
CVS Corp. (DE) $37,006,200,000 $1,224,700,000 $15,283,400,000 $26,955,380,640
Caremark Rx, Inc. $32,991,251,000 $932,371,000 $12,850,848,000 $26,994,781,082
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
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
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
Industry Leaders
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Walgreens MedcoHealth
Solutions
CVS Corp. CaremarkRx Inc
Mkt Cap
Revenues
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
02468
1012141618
ThisYear
NextYear
5 yr.Est.
Walgreens
Industry
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
Answer
A) 50.2% B) 65.8% C) 73.6% D) 82.1% E) I Don’t Know
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
Questions?