Walgreens to Acquire Kerr Drug

Drugstore giant to buy a pioneer in providing health care.

NEW YORK — Although the true beauty of Walgreen Co.’s deal to acquire the assets of Kerr Drug, disclosed on Tuesday, lies in the purchase of a company with a strong foundation in pharmacy and wellness, the agreement also nets Walgreens a robust cosmetics business and ripe markets for Look Boutiques.

In particular, Raleigh, N.C.-based Kerr Drug operates in small, yet growing, communities, where shoppers often don’t have access to premium brands that Walgreens can deliver. The merchandising team, spearheaded by respected industry veteran Bill Baxley, is credited with building a very loyal following to its stores beauty department.

Financial terms of the agreement were not disclosed. In fiscal year 2012, Kerr Drug’s retail drugstores and specialty pharmacy business recorded total sales of $381 million. The acquisition is structured as an asset transaction and includes Kerr’s 76 retail drugstores and its specialty pharmacy business as well as a distribution center.

The remaining corporate Kerr Drug will retain ownership of its long-term care pharmacy business. Kerr was among the first American drugstore chains to emphasize the importance of health and wellness and a pioneer in in-store clinics under what it calls an “enhanced pharmaceutical care center model” that goes beyond just checkups and inoculations to include everything from asthma management to diabetes screening.

Walgreens has 8,177 stores with about 200 overlapping existing Kerr units, according to Walgreens. The company said it hopes to keep most of the stores open.

Until the deal closes, Kerr Drug and Walgreens will continue to operate separately. From there, the Kerr brand, which is highly regarded in its markets, will be used in the “near term,” with decisions made over time.

Walgreens retained the Duane Reade logo (although pharmacies have the Walgreens name also), when it bought the New York power house in 2010, other acquired chain logos such as Happy Harry’s have been phased out over time.

In addition to strong organic growth, Walgreens has been on a mini buying spree in the past few years, scooping up USA Drug last year and inking a partnership with Alliance Boots in June 2012. In just the past few years, Walgreens also bought 25 Snyders Drug Stores, Duane Reade and a handful of other small chains.

“The Kerr Drug retail drugstores and specialty pharmacy business are an exceptional addition to the Walgreens family of companies,” said Walgreens president and chief executive officer Greg Wasson. “We are closely aligned on the important task of expanding the health-care role that community pharmacists can have with their patients, and we share the common goal of stepping out of the traditional drugstore format to create a new experience for our customers.”

Kerr Drug chairman, president and ceo Anthony Civello said, “Kerr Drug’s strategy and core principles have always been focused on its unique ability to provide patients access to the most comprehensive and convenient health and wellness offering in the industry. Walgreens is the perfect partner to continue this journey as a patient-oriented company dedicated to expanding the role of the pharmacist as an integral part of health care.”