Walgreens to Close Stores It Doesn’t Yet Own

In July Walgreen Co. (NYSE: WAG) acquired USA Drug and 144 of the company’s stores for approximately $438 million. At the time, Walgreens’ president/CEO said:

This acquisition expands our business in an important region of the country. It will provide significant new pharmacy business for us in this region while also enabling us to bring the Walgreens experience to many additional smaller communities where USA Drug has developed strong operational expertise.

The deal is expected to close sometime this month, and Walgreens has confirmed that it plans to close 76 of the not-quite acquired stores, according to a report in Drug Store News:

Although we have not completed the purchase of the USA Drug chain, we are taking steps in anticipation of the completion of the transaction, which is expected to occur in mid-September. After careful planning and market analysis, on Monday we began to notify employees of our intent to close [the stores]. Our decisions about store closures are based on a number of considerations, including size of the market and proximity to other Walgreens and USA Drug stores and affiliates. We expect to close the stores by November.

Did Walgreens just make the deal in order to get rid of competition? That’s what it looks like. And shareholders who thought they were gaining 144 new locations just saw the price per store double. That doesn’t seem like a very good deal.

Shares of Walgreens are down about 1.3% today at $35.56 in a 52-week range of $28.53 to $37.61.

Paul Ausick