Walgreen Buys Drugstore.com for $429 Million

Walgreen Buys Drugstore.com for $429 Million

Walgreen Co., the largest U.S. drugstore chain, agreed to buy Drugstore.com Inc. for about $429 million to add about 60,000 products available online.

Drugstore.com holders will receive $3.80 in cash for each of their shares, in a transaction with an enterprise value of $409 million, Deerfield, Illinois-based Walgreen said today in a statement. That’s a 112 percent premium to Drugstore.com’s closing share price of $1.79 yesterday.

Walgreen is making its largest acquisition in a year after the April 2010 purchase of Duane Reade made it the biggest drugstore chain in New York’s five boroughs. The Drugstore.com deal will add websites including Beauty.com and SkinStore.com.

Walgreen fell 3 cents to $39.80 at 9:57 a.m. in New York Stock Exchange composite trading, giving it a market valuation of about $36.7 billion. Drugstore.com, based in Bellevue, Washington, jumped to $3.79 in Nasdaq trading. The stock had slumped 52 percent in the past year before today.

The buyers of 85 U.S. online retailers paid an average premium of 21 percent over the past three years, compared with the target’s average price of 20 trading days before the announcement, according to Bloomberg data. On that basis, Walgreen agreed to pay a premium of 103 percent.

Walgreen is offering about 0.90 times Drugstore.com’s trailing annual revenue, according to Bloomberg data, similar to the median of five comparable deals over the past three years.

The chain agreed this month to sell its pharmacy-benefit management business for $525 million as it focuses on providing health care related goods and services directly to customers.  Bloomberg