Walgreens poised to get bigger and go global

Mitchell Hartman Dec 29, 2014
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Walgreens poised to get bigger and go global

Mitchell Hartman Dec 29, 2014
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Walgreens – the biggest drugstore chain in the U.S. – is poised to become the biggest drugstore chain on the planet. Shareholders approved the final stage of a merger with European drugstore chain Alliance Boots by a 97 percent margin at a company shareholder meeting Monday morning.

All told, the merger is worth more than $21 billion. In a 2012 deal, Walgreens acquired 45 percent of Alliance Boots. The remaining 55 percent tranche of the deal went forward in mid-2014, and following shareholder approval, it will close Wednesday. Executives from Alliance Boots will be in significant leadership positions in the merged company.

Alliance Boots has more than 4,500 stores across Europe, Asia, the Middle East and Latin America. Walgreens has more than 8,000 stores in the U.S. But, according to retail consultant Burt Flickinger of the Strategic Resource Group, Walgreens has weaker discount-programs and worse-performing stores than its rivals, and it has lost ground in the domestic market.

“This merger really allows Walgreens-Alliance Boots to pole vault past CVS or anyone else in global competition,” says Flickinger.

Meanwhile, Walgreens could benefit from some of Boots’ higher-end European offerings, says John Palizza, a retired business professor and former Walgreens executive who owns shares in the company.

“Some of Boots’ private-label is very high quality,” says Palizza. “Here in the U.S., when you see private label you typically to think, ‘Well, this is second tier.’”

Selling more premium store-brands could help Walgreens, says Palizza, since it’s the items that fill the aisles in the front of the store – groceries, household supplies, health-and-beauty products – that increasingly drive drugstore profits.

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