Walgreens to Acquire Duane Reade

Walgreen Co. (Deerfield, Ill.) is acquiring New York-based drugstore chain Duane Reade from affiliates of Oak Hill Capital Partners in a cash transaction valued at $1.075 billion, which includes the assumption of debt.

The transaction includes all 257 Duane Reade stores located in the New York, which will continue to operate under its brand name after the transaction closes. The company has not decided if Walgreens’ 70 New York stores will retail its nameplate or be changed in an effort to harmonize the Walgreens and Duane Reade brands.

“Duane Reade is a compelling strategic acquisition that will immediately provide Walgreens with a leading position in the largest drugstore market in the U.S.,” says Walgreens president and ceo Greg Wasson. “In addition, Duane Reade’s recent initiatives in urban retailing, customer loyalty and private brand products support and accelerate Walgreens strategy to enhance the customer experience in our network of more than 7,100 stores across the country.”

Walgreens says the purchase, which is subject to customary conditions, including receiving regulatory approvals, will be funded with existing cash. The transaction is expected to be finalized by August.

“This transaction is consistent with the capital allocation objectives we outlined last fall, which included investing in strategic opportunities that reinforce the company’s core strategies and meet return requirements,” said Wasson.

Duane Reade, which opened in 1960 and is named after its first store located on Broadway between Duane and Reade streets in Manhattan, reported unaudited net sales of $1.8 billion for the latest 12-month period ending Dec. 26, 2009.

Walgreens, with fiscal 2009 sales of $63 billion, operates 7162 drugstores in all 50 states, the District of Columbia and Puerto Rico.