* Drugstore.com shareholders get $3.80 a share
* Walgreen says drugstore.com has more than 3 mln users
* Walgreen shares up 1.2 pct; drugstore.com jumps to $3.79
(Adds investment advisers)
By Brad Dorfman
CHICAGO, March 24 Walgreen Co WAG.N plans to
buy drugstore.com DSCM.O for $429 million, expanding the
online presence of the world's largest drugstore chain.
Shareholders in the online retailer, which has never turned
an annual profit, will receive $3.80 a share, which is more
than double the company's closing stock price on Wednesday.
Walgreen recently agreed to sell its pharmacy benefits
business in an effort to focus more directly on retail and
Drugstore.com, which sells health, beauty, clinical
skincare and other products, had 2010 sales of $456 million,
compared with fiscal 2010 sales of about $67 billion for
Walgreen. Walgreen does not break out its online sales
Walgreen said it expected the deal to close by the end of
June and to cut about 3 cents a share from its 2011 earnings.
The company also expects the deal to cut 3 cents to 4 cents
more from earnings in 2012 and another 1 cent to 2 cents in
Founded in 1998, drugstore.com shares hit an all-time high
of $70 the day it began trading in July 2009, at the height of
the dot.com boom, but never reached that level again.
More recently, the company has come under pressure from
competition that ranges from Amazon.com (AMZN.O) to Wal-Mart
Stores Inc's (WMT.N) push into online sales, while some health
and personal care manufacturers, such as Procter & Gamble Co
(PG.N), have begun selling directly to consumers online.
"I think the online business is going to be very
competitive and it is going to be very difficult for anybody to
get a competitive advantage," Morningstar analyst Matthew
Coffina said. The deal "seems value destroying to me."
But at the same time, the deal is also a very small one for
Walgreen, which has a market capitalization of about $36
Walgreen has been trying to boost its own online presence
of the past two years, adding online chats with pharmacists and
express prescription refills under the guidance of Sona Chawla,
who became the first e-commerce senior vice president for the
company in 2008.
Credit Suisse Securities CSGN.VX advised Walgreen on the
transaction; Allen & Co and Sonenshine Partners were financial
advisers for drugstore.com.
Shares of Walgreen were up 48 cents at $40.31 in midday
trade Thursday on the New York Stock Exchange, while
drugstore.com rose to $3.78 on Nasdaq from its Wednesday close
(Reporting by Brad Dorfman; Editing by Derek Caney, Lisa Von
Ahn, Dave Zimmerman)