Walgreen to buy Duane Reade for $623M

Walgreen Co. said yesterday it has agreed to buy the drugstore operator Duane Reade in a move that will more than quadruple the number of stores it has in the metropolitan area.

Walgreen, the nation's biggest drugstore operator, said it would pay about $623 million for Duane Reade Holdings Inc., which is the biggest drugstore chain in the city. Including $457 million in debt held by Duane Reade, the transaction is valued at $1.08 billion. Walgreen said Duane Reade's sales totaled about $1.8 billion in 2009.

The deal, which requires regulatory approval, would include all 257 Duane Reade stores, along with the corporate office and two distribution centers. Most of those stores are in Manhattan, and nine are on Long Island.

Walgreen, based in Deerfield, Ill., described the deal as its biggest retail acquisition ever. It operates 70 stores in the metropolitan area and had 7,162 stores overall as of Jan. 31.

Walgreen said Duane Reade stores will keep their name after the deal closes, and it will decide over time on how to combine the two brands.

The deal unites two chains that are in transition. Walgreen is trying to improve sales by converting thousands of stores to a new layout, and Duane Reade has done the same with 30 of its stores. Walgreen suggested it could get new ideas from Duane Reade. It plans to continue opening new Duane Reade stores and renovating older ones. All the stores should be converted to the new format in four or five years.

Walgreen also praised Duane Reade's FlexRewards customer loyalty program, its private label products, and its "store within a store" Look Boutique section, where cosmetics and skin care products are sold in an area that looks more like a department store than a drugstore. - AP