WALGREEN MOVING INTO NORTHEAST WITH PURCHASE OF 64-STORE MEDI MART CHAIN FROM STOP & SHOP; ACQUISITION IS BIGGEST SINCE 1984 CHAIN CONSOLIDATIONS
Walgreen is extending its operations into the New England states and expanding its presence in New Jersey and New York through the planned purchase of the 64-store Medi Mart drug chain from the Stop & Shop grocery store chain. Terms of the agreement were not disclosed. In a May 1 press release, Walgreen and Stop & Shop announced they had signed an agreement in principle for the sale of "substantially all the assets and leases" of Medi Mart to Walgreen. The release notes that under the agreement Walgreen will acquire "66 locations -- 64 existing Medi Mart stores and two new sites." Three existing Medi Mart stores -- one each in Quincy, Mass., Saugus, Mass., and Waterford, Conn. -- will be closed. Medi Mart sales in fiscal 1986 (ended Feb. 1) increased 7% from the previous year to $162.1 mil. -- or approximately $2.4 mil. per store. That figure compares to the average sales for Walgreen stores last year of $2.8 mil. While Stop & Shop does not break out operating profits for its drug store business, a spokesperson for Stop & Shop said Medi Mart was profitable last year. In the Northeast, Walgreen will be competing head to head with Adams, CVS, Osco and Rite Aid, and, to a lesser extent, Fay's and Rix Dunnington. Walgreen is acquiring 29 Medi Mart stores in Massachusetts, 18 stores in Connecticut, 14 stores in New Jersey, two stores in New Hampshire, and one in upstate New York. The Medi Mart stores average approximately 10,000 sq. ft. Stop & Shop announced in early March that its Medi Mart drug store division and its Perkins tobbacco shop chain were on the auction block. The grocery and mass merchandiser chain, which also operates Bradlees discount stores, indicated at that time that it was dissatisfied with the slow growth of the drug store business. Deerfield, Illinois-based Walgreen has been eyeing the Northeast for expansion for several years. Walgreen currently operates nine of its 1,181 drug stores in New York, Connecticut and New Jersey. In the last two years, Walgreen has opened three stores in Manhattan. Industry speculation had paired Walgreen as a likely suitor for Medi Mart after Stop & Shop's anouncement in March. In its most recent annual report for fiscal 1985 (ended Aug. 31), Walgreen said it planned to add over 100 stores in fiscal 1986 in addition to the Ribordy acquisition ("The Pink Sheet" Dec. 12, p. 12). Walgreen stressed in the annual report that it was "very serious" in its "quest for acquisitions of all sizes." Since the rash of mergers in the drug chain industry in 1984, Walgreen has been alone in the industry in aggressively seeking expansion through acquisition. In addition to the Medi Mart agreement, Walgreen acquired the 26 store Ribordy drug chain, located in Indiana, last September ("The Pink Sheet Sept. 2, T&G-6). Merger activity in the chain drug industry slowed in 1985 as working capital and financings of several of larger chains (Dart, Revco, and Jack Eckerd) became tied up in leveraged buyouts by management groups. Several other drug chains have been occupied with consolidating recent acquisitions (American Stores/Jewel, Imasco/Peoples/Rea & Derick). The release notes that the agreement between Walgreen and Stop & Shop "is subject to approval by the boards of directors of both companies and to the resolution of a definitive agreement."
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