Walgreens Buys Drugstore.com – Can You Capitalize on it?
With new brick-and-mortars springing up on every corner, Walgreen’s $409 million acquisition of Drugstore.com should come as no real surprise.
Walgreens currently has 7,689 locations throughout the U.S. and does business online at Walgreens.com. Drugstore.com’s purchase price will come from Walgreen’s existing buyout chest, which is well stocked after racking up $67 billion in fiscal sales last year. The acquisition should prove to be a bargain for the retail giant. Not only do they get the holy grail of dotcom names, an average of four million unique web visitors, a thriving affiliate marketing program, and a solid $456.5 million in net sales in 2010, they also get control of Drugstore.com’s associated web sites: Beauty.com, SkinStore.com, and VisionDirect.com.
This seems like a solid fiscal move for Walgreens. Drugstore.com is a well-established brand with a solid customer base of about 3 million consumers and 11 years on the web since the virtual doors opened in 1999. The primary website and the associated websites fit well with Walgreens company image and corporate initiatives.
Greg Wasson, Walgreens president and CEO, commented that the merger will also provide better service to Walgreens existing customers by adding 60,000 online products to their existing product line. Walgreens appears ready to continue Drugstore.com’s vendor and partner relationships.
What happens to Drugstore.com employees and stockholders?
Walgreens plans to maintain separate branding and leave the existing employee structure in place. Drugstore.com will remain headquartered in Bellevue, Washington. For the nearly 1,000 Drugstore.com employees, the transition should be fairly smooth, at least in the beginning.
Drugstore.com’s 30-day average stock price prior to the announcement was approximately $2.00 per share. As part of the purchase agreement, stockholders will receive more than 102% over the average price, a total of $3.80 per share. That turned out to be quite an investment!
Where are we going with this?
Analysts expect a continuing upward trend for Walgreens stock. While I’ll leave the stock advice to experts, I see an aggressive marketing campaign, smart acquisitions, and a steady upward trend. I also see record baby boomer retirement and a president committed to making health care – and medications – more affordable for more people. The health care industry is poised on boom or – if the tea party has its way – bust. What happens next?
What do you think? Does this move make Walgreens a more attractive investment, or did we miss the best opportunity in the summer of 2009 when economic factors forced stock prices down? Has this ship already sailed, or is it waiting at the dock?