Page 1

2 WWD WEDNESDAY, JUNE 20, 2012

WWD.COM

BEAUTY BEAT

By Vicki M. Young and FaYe BrookMan Walgreen and alliance Boots are set to create the world’s first global pharmacyled health and beauty group, as well as the largest international wholesale and distribution network in the industry. Walgreen co. is set to acquire a 45 percent equity stake in alliance Boots gmbH, in a cashand-stock transaction valued at

increased earnings, diversification and growth. “our combined strength gives us the breadth, resources and expertise to create an unmatched global platform now, and well into the future, to meet the challenges and needs of our customers.” Pessina said on a call to analysts, “We are all very much aware that bringing together these two great businesses creates a critical mass, but also a new business model that itself will generate a wide range of op-

Stefano Pessina and Gregory Wasson

$6.7 billion. The newly merged company will have 365,000 employees and more than $110 billion in combined revenue. it will be present in 30 countries, with three major brands: Walgreens, Boots and alliance Healthcare. it will also have more than 11,000 stores in 12 countries. The deal comprises $4 billion in cash and 83.4 million shares, and is expected to close by Sept. 1, subject to the requisite regulatory approvals. Terms of the transaction also give Walgreens the option of acquiring the remaining 55 percent of alliance Boots three years from now. at the current Walgreens share price and dollareuro exchange rate, an acquisition of the balance of alliance Boots would have the second transaction valued at $9.5 billion, plus the assumption of alliance Boots’ then-outstanding debt. Both transactions exclude alliance Boots’ minority interest in galenica, a Swiss health-care group. Several Walgreens senior executives, including president and chief executive officer gregory Wasson, will join the alliance Boots board, while alliance Boots executive chairman Stefano Pessina and kkr & co. member and director dominic Murphy will join the Walgreens board. kkr, whose executives could not be reached for comment, is a shareholder in alliance Boots. kkr and a group of investors acquired a two-thirds stake in 2007, with Pessina acquiring the remaining one-third. Pessina, via his family trust, is now the largest shareholder of Walgreens. in a conference call to Wall Street, Wasson said the two firms began discussions more than 18 months ago. Wasson pointed out: “Working together, Walgreens and alliance Boots will have access to new customers, markets and lines of business across the u.S., europe and in key emerging markets. all of which will drive potential for

portunities for us to expand our enterprise in terms of attracting new partners and opening new markets and services within the health and beauty sector for us.” ornella Barra, ceo of the pharmaceutical wholesale division for alliance Boots, said in a telephone interview: “This is not a takeover, but a merger.” among the first goals of the merger, she said, is to develop wholesale activity in the u.S. for the Boots brand, with a focus on the Boots no. 7 and Botanic brands in particular. an alliance Boots spokesman said that sales of Boots products in the u.S. rose 30 percent last year. “There is clearly appetite and potential for these brands, and we are still a start-up company in the u.S.,” he said. Barra said that generally the biggest synergies between the two companies would be in generic health products, over-thecounter medicines and parapharmaceutical drugs. The plan is for Boots products to be available in Walgreens stores, including its duane reade operation, and potentially have the Walgreens brand in Boots stores, said executives for both firms. William d. Busko, managing director at consensus advisors, said there could be more of these transatlantic deals. Zumiez inc. on Tuesday also said it reached across the atlantic to buy austrian action sports retailer Blue Tomato, whose e-commerce site is available in 14 languages, and contributes 75 percent of Blue Tomato’s total net sales. “The lessons learned from the recession and austerity measures have many companies [now] having the strongest balance sheets that they’ve had in years. They’ve accumulated a lot of cash but see growth in the u.S. as limited. There aren’t many retailers aggressively opening up stores here. They’re looking for opportunities to expand sales, including

overseas, to expand their market share,” Busko said as the reason why these deals are occurring. He cautioned that the big question will be how well the parent firms will be able to manage the overseas businesses and cultures that are different from their home markets. candace corlett, president of WSl Strategic retail, described the transaction as “brilliant and daunting,” because the prospect of going global can be scary to investors. “The world is a big bite to digest,” she said. The good news, however, is that Boots has already figured out how to operate european health-care and pharmacy businesses. Boots already has a good test market in the u.S. with its successful presentation at Target and ulta. “Boots could easily go into Walgreens’ look Boutique,” said allan Mottus, industry consultant. The deal ignites discussion of what ulta and Target will do with Boots beauty products, which have been popular in both chains. Two schools of thought emerge. one executive noted that Minute clinics were in Target until cVS bought them and then were eliminated. cVS and Target also shared in the u.S. launch of Boots products, and cVS no longer carries them. However, the flip side, said a former chain drug executive, is that Walgreens could give Boots products the leverage needed to be in both and have enough doors to justify advertising and marketing campaigns. not everyone is as enthusiastic about the megaretailers created. “Wasson hasn’t corrected the problem with express Scripts and is using this as an alternative. The question is, with the european meltdown, is if he’s risking his own security,” said Mottus. (Walgreens and benefits manager express Scripts couldn’t agree on a contract and severed ties in January). Mottus did note it takes Walgreens out of the head-to-head bashing with cVS, but corlett at WSl said don’t count out the chance cVS might look for global acquisitions of its own. “This could start the trend,” she suggested. citigroup global Markets analyst deborah Weinswig reiterated her sell rating on Walgreen stock, stating, “While the transaction creates some global opportunities, we believe it does not resolve Walgreen’s issues in the u.S.” also, u.S. ratings agency Standard & Poor’s placed Walgreen co.’s “a” rating on creditWatch, with negative implications. S&P said it believed the deal will result in a “meaningful deterioration of Walgreen’s financial-risk profile due to the incremental debt incurred to fund the transaction.” Walgreen said Tuesday that third-quarter net earnings for the period ended May 31 fell 10.9 percent to $537 million, or 62 cents a diluted share, from $603 million, or 65 cents, a year ago. net sales fell 3.4 percent to $17.75 billion from $18.37 billion. For the nine months, net earnings fell 7.7 percent to $1.77 billion on a 0.6 percent gain in net sales to $54.56 billion. Shares of Walgreen fell nearly 5.9 percent to close at $30.09 in trading Tuesday on the new York Stock exchange. — With contributions from samantha conti

ThE BriEfing Box in Today’s WWd On Governors Island for the Jazz Age Lawn Party.

Photo by Kyle ericKsen

Walgreen, Alliance Boots to Merge

J.C. Penney Co. Inc. chief executive officer Ron Johnson discusses the departure of company president Michael Francis after just eight months on the job. PAGE 1 Narciso Rodriguez this fall becomes the first designer to participate in Kohl’s new Design Nation program. PAGE 1 Walgreens and Alliance Boots are set to create the world’s first global pharmacy-led health and beauty group. PAGE 2 In a strong resort season, the good clothes have ranged from appealing to exciting, but the season is far from where it needs to be. PAGE 5 China’s service industries face challenges as a new generation, dubbed the “little emperors,” enters the workforce. PAGE 6 Guess footwear licensee Marc Fisher will pay Gucci nearly $1.5 million less than previously ordered. PAGE 7 Zumiez Inc. has inked a deal to acquire Austrian action sports retailer Blue Tomato for $75.3 million. PAGE 7 Safilo Group is kicking off the 10th anniversary of its Solstice Sunglasses retail chain with a new Carrera capsule collection and private party in New York. PAGE 8 Gap Inc. continues to reduce the square footage of its Gap and Banana Republic specialty stores in North America but sees opportunity to roll out outlets. PAGE 8 Fiona Apple toasted her new record with an intimate set at the Top of the Standard in New York on Monday. PAGE 9 Anyone with a mild interest in media news has probably read about Cat Marnell and her untimely departure from xojane.com. PAGE 9 J. Crew’s Millard “Mickey” Drexler was spotted in London this week scoping potential locations for the brand’s first stores outside North America. PAGE 11 on WWD.CoM THEY ARE WEARING: Nearly 3,000 revelers got decked out in their most fabulous Twenties costumes for the seventh annual Jazz Age Lawn Party on New York’s Governors Island. For more photos, see WWD.com/eye. To e-mail reporTers and ediTors aT WWd, The address is firsTname_lasTname@fairchildfashion.com, using The individual’s name.

WWD IS A REGISTERED TRADEMARK OF ADVANCE MAGAZINE PUBLISHERS INC. COPYRIGHT ©2012 FAIRCHILD FASHION MEDIA. ALL RIGHTS RESERVED. PRINTED IN THE U.S.A. VOLUME 203, NO. 127. WEDNESDAY, JUNE 20, 2012. WWD (ISSN 0149–5380) is published daily (except Saturdays, Sundays and holidays, with one additional issue in May, June, October and December, and two additional issues in February, March, April, August, September and November) by Fairchild Fashion Media, which is a division of Advance Magazine Publishers Inc. PRINCIPAL OFFICE: 750 Third Avenue, New York, NY 10017. Shared Services provided by Condé Nast: S.I. Newhouse, Jr., Chairman; Charles H. Townsend, Chief Executive Officer; Robert A. Sauerberg Jr., President; John W. Bellando, Chief Operating Officer & Chief Financial Officer; Jill Bright, Chief Administrative Officer. Periodicals postage paid at New York, NY, and at additional mailing offices. Canada Post Publications Mail Agreement No. 40644503. Canadian Goods and Services Tax Registration No. 886549096-RT0001. Canada Post: return undeliverable Canadian addresses to P.O. Box 503, RPO West Beaver Cre, Rich-Hill, ON L4B 4R6. POSTMASTER: SEND ADDRESS CHANGES TO WOMEN’S WEAR DAILY, P.O. Box 15008, North Hollywood, CA 91615 5008. FOR SUBSCRIPTIONS, ADDRESS CHANGES, ADJUSTMENTS, OR BACK ISSUE INQUIRIES: Please write to WWD, P.O. Box 15008, North Hollywood, CA 91615-5008, call 800-289-0273, or visit www.subnow.com/wd. Please give both new and old addresses as printed on most recent label. Subscribers: If the Post Office alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within one year. If during your subscription term or up to one year after the magazine becomes undeliverable, you are ever dissatisfied with your subscription, let us know. You will receive a full refund on all unmailed issues. First copy of new subscription will be mailed within four weeks after receipt of order. Address all editorial, business, and production correspondence to WOMEN’S WEAR DAILY, 750 Third Avenue, New York, NY 10017. For permissions requests, please call 212-630-5656 or fax the request to 212-630-5883. For all request for reprints of articles please contact The YGS Group at condenast@theygsgroup.com, or call 800-501-9571. Visit us online at www.wwd.com. To subscribe to other Fairchild Fashion Media magazines on the World Wide Web, visit www.fairchildpub.com. Occasionally, we make our subscriber list available to carefully screened companies that offer products and services that we believe would interest our readers. If you do not want to receive these offers and/or information, please advise us at P.O. Box 15008, North Hollywood, CA 91615-5008 or call 800-289-0273. WOMEN’S WEAR DAILY IS NOT RESPONSIBLE FOR THE RETURN OR LOSS OF, OR FOR DAMAGE OR ANY OTHER INJURY TO, UNSOLICITED MANUSCRIPTS, UNSOLICITED ART WORK (INCLUDING, BUT NOT LIMITED TO, DRAWINGS, PHOTOGRAPHS, AND TRANSPARENCIES), OR ANY OTHER UNSOLICITED MATERIALS. THOSE SUBMITTING MANUSCRIPTS, PHOTOGRAPHS, ART WORK, OR OTHER MATERIALS FOR CONSIDERATION SHOULD NOT SEND ORIGINALS, UNLESS SPECIFICALLY REQUESTED TO DO SO BY WOMEN’S WEAR DAILY IN WRITING. MANUSCRIPTS, PHOTOGRAPHS, AND OTHER MATERIALS SUBMITTED MUST BE ACCOMPANIED BY A SELF-ADDRESSED STAMPED ENVELOPE.

Walgreens, Alliance Boots to Merge - WWD, June 20, 2012  

Candace Corlett, president of WSL Strategic Retail, described the transaction as “brilliant and daunting,” because the prospect of going glo...

Read more
Read more
Similar to
Popular now
Just for you