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Walgreens Acquires Familymeds Pharmacies Matt Thompson Stu Beurskens Walgreens Acquires Familymeds Pharmacies Matt Thompson Stu Beurskens

About Walgreens l l Founded in 1901 Retail drugstore chain that deals primarily in About Walgreens l l Founded in 1901 Retail drugstore chain that deals primarily in the sale of prescription and non-prescription drugs As of August 31, 2006 Walgreens operated 5, 461 stores in 47 states and Puerto Rico Walgreens currently employs more than 195, 000 people

Walgreens’ Current Financials Revenues Walgreen Co. Net Income $47, 409, 000 $1, 750, 600, Walgreens’ Current Financials Revenues Walgreen Co. Net Income $47, 409, 000 $1, 750, 600, 000 Total Assets Market Cap $17, 131, 100, 000 $46, 048, 085, 790 Medco Health Solutions, Inc. 20% 66% 20% 61% CVS Corp. (DE) 22% 30% 11% 41% Caremark Rx, Inc. 30% 47% 25% 41% *The top chart displays Walgreens’ current year end numbers for FY 2006. The subsequent chart represents Walgreens’ top 3 competitors and the margins Walgreens holds on each.

Competitors’ Financials Revenues Net Income Total Assets Market Cap Medco Health Solutions, Inc. $37, Competitors’ Financials Revenues Net Income Total Assets Market Cap Medco Health Solutions, Inc. $37, 870, 900, 000 $602, 000 $13, 703, 000 $18, 031, 004, 841 CVS Corp. (DE) $37, 006, 200, 000 $1, 224, 700, 000 $15, 283, 400, 000 $26, 955, 380, 640 Caremark Rx, Inc. $32, 991, 251, 000 $932, 371, 000 $12, 850, 848, 000 $26, 994, 781, 082

Current Growth Strategy l l l Walgreens’ is currently looking to expand to 7, Current Growth Strategy l l l Walgreens’ is currently looking to expand to 7, 000 stores nationwide by 2010 In 2007, Walgreens plans to add 500 stores (netting 400 after closures and moves) Current growth targets are California, North Carolina, Florida, Texas and the state of New York

Walgreens Acquisition l l l Reached an agreement to acquire select assets of Family. Walgreens Acquisition l l l Reached an agreement to acquire select assets of Family. Meds Group Inc. Walgreens is acquiring the assets (53 pharmacies in 11 states) for approximately $60 million, in addition to assuming certain real estate leases Other national and regional pharmacies will buy the remaining locations for $19 million

Hostile Takeover? l Hostile Takeover? l "I am excited that Walgreens shares our vision of excellence in customer care, intends to grow our clinic and Worksite Pharmacy models and will be offering positions to our associates*. ” l Unlike some of the cases we have gone over in this class, both sides of this transaction feel it is in their respective company’s best interest. *Quote of Ed Mercadante, Chairman & CEO of Family. Meds

Industry Leaders Industry Leaders

Future of the Company l The chart to the right represents the current and Future of the Company l The chart to the right represents the current and forecasted growth rates for Walgreens and the Drug Store Industry as a whole. *Growth rate estimates were taken from Yahoo Finance

Walgreens’ PVGO l Walgreens is extremely focused on maintaining the growth of their company. Walgreens’ PVGO l Walgreens is extremely focused on maintaining the growth of their company. The following statistics were taken from Yahoo! Finance: – – – l ROE: 19. 07% Payout Ratio: 16% Current Stock Price: $46. 01 DIV 1: $0. 31 EPS 1: 2. 03 What is the PVGO as a % of Walgreens’ stock price? *Assume constant growth rates

Answer l l l A) 50. 2% B) 65. 8% C) 73. 6% D) Answer l l l A) 50. 2% B) 65. 8% C) 73. 6% D) 82. 1% E) I Don’t Know

Stu and Matt’s Forecast l l After an initial expected rise in Walgreens’ stock Stu and Matt’s Forecast l l After an initial expected rise in Walgreens’ stock price, we feel it is too early to make an accurate prediction However, based on past success, current financials and expected growth rates, we feel Walgreens will remain an industry leader for years to come

Questions? Questions?