Walgreens Acquires Familymeds Pharmacies

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Walgreens Acquires Familymeds Pharmacies

• Matt Thompson
• Stu Beurskens

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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

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Walgreens Current Financials
Revenues Net Income Net Income Total Assets Market Cap
Walgreen Co. 47,409,000,000 1,750,600,000 17,131,100,000 17,131,100,000 46,048,085,790
Medco Health Solutions, 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.
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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
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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

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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

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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 companys best
  interest.

Quote of Ed Mercadante, Chairman CEO of
FamilyMeds
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Industry Leaders
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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

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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
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Answer

• A) 50.2
• B) 65.8
• C) 73.6
• D) 82.1
• E) I Dont Know

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Stu and Matts 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

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Questions?