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Walgreens in $6.7 billion deal to acquire 45% stake in Alliance Boots

BY Marianne Wilson

New York — Walgreen Co. said Tuesday it will pay $6.7 billion for a 45% stake in European health and beauty retailer Alliance Boots, which is based in Nottingham, England, with an option to buy the rest of the company in about three years. It is the first international venture and biggest deal ever for the U.S. chain.

“This is potentially one of the most important moves in European retail history,” said Bryan Roberts, director at Kantar Retail in London, in a Bloomberg report. “Walgreens is still a U.S. business so its desire to achieve a more global footprint will be a game-changer. This gets them into Europe and Asia.”

The company will spend $4 billion in cash and the remainder in stock to purchase the stake for Boots, which operates more than 3,200 stores in 11 countries.

The deal will create one of the world’s largest drugstore and pharmacy retailers with more than 11,000 stores in 12 countries. The acquisition also would allow Walgreens to expand into overseas markets, and give Boots its long-wanted U.S. presence.

“We are bringing together the strengths and expertise of each company to create a worldwide healthcare platform for the future that can provide innovative ways to address global health and wellness challenges,” said Walgreens CEO Gregory Wasson in a statement. “We are looking forward to working with Alliance Boots to leverage our combined strengths and provide an even broader range of innovative, cost-effective products and services to patients and customers across the healthcare landscape. Together we will be ideally positioned to expand our customer offerings in our existing markets and become the health and wellbeing partner of choice in emerging markets.”

The deal will lead to cost and revenue benefits across both companies of $100 million to $150 million in the first year and $1 billion by the end of 2016, according to the Walgreens statement.

Wasson said the deal is “a partnership, not a takeover,” adding that talks between the companies have been taking place for 18 months, Bloomberg reported. Walgreen will assume Alliance Boots¹s debt in the second phase of the tie-up.

Walgreens in acquiring the stake in Boots from a group led by private equity firm Kohlberg Kravis Roberts and Alliance Boots chairman Stefano Pessina, who joined together to acquire Boots in 2007.

There are no plans for job reductions at either company as a result of the transaction, Walgreens said. The chain said it will maintain its existing headquarters in Deerfield, Ill.; and Alliance Boots remains committed to its current support offices across Europe, as well as keeping the Boots operational hub in Nottingham, England.

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Nook success helps cut Barnes & Noble loss

BY CSA STAFF

NEW YORK — Barnes & Noble saw revenue increases across all of its segments, but it was itsdigital segment, lead by Nook, that helped narrow its net loss for the fourth quarter and fiscal year 2012.

Barnes & Noble’s consolidated revenue for the fourth quarter increased 0.4% to $1.4 billion as compared with the prior year. Net loss for the quarter improved 3% as compared with the prior year to $57.7 million, or $1.08 per share.

For fiscal 2012, consolidated revenues increased 2% to $7.1 billion as compared with the prior year.The fiscal 2012 consolidated net loss improved 7% as compared with the prior year to $68.9 million, or $1.41 per share.

Sales at the company’s retail segment were $1.1 billion for the quarter and $4.9 billion for the full year, increasing 0.5% for the quarter while decreasing 1.5% for the fiscal year. Comparable bookstore sales increased 4.5% for the quarter and 1.4% for the full year, as compared to the prior year periods. According to the company, the comps increase was helped by the closing of Borders’ stores in 2012, increased sales of Nook products, and a strong title lineup including "The Hunger Games" and "Fifty Shades of Grey" trilogies. Core comparable bookstore sales, which exclude sales of Nook products, increased 6.9% for the quarter and 0.7% for the full year. BN.com sales continued to decline for the quarter as well as the fiscal year.

Barnes & Noble College bookstores saw their revenue increase 5.7% for the quarter to $228 million and decrease 1.9% to $1.7 billion for the year. As compared to the year ago period, fourth quarter sales were positively impacted by the recognition of textbook rental sales deferred from the third quarter. However, full year sales were lower as compared to a year ago, due to a shift from selling new and used textbooks to lower priced textbook rentals. Comparable College store sales decreased 2.2% for the quarter and 0.3% for the full year, as compared to the prior year periods. College comparable store sales reflect the retail selling price of a new or used textbook when rented, rather than solely the rental fee received and amortized over the rental period.

The company’s Nook segment delivered revenue of $164 million for the quarter and $933 million for the full year. Nook segment comparable sales increased 1% for the fourth quarter while increasing 45% for the full year, as compared with the prior year periods. Device sales declined during the fourth quarter due to higher third-party channel partner returns, lower selling volume and lower average selling prices. In order to optimize the supply chain for new products, the company took back NOOK Simple Touch inventory following the previously announced holiday sales shortfall. Digital content sales increased 65% for the fourth quarter and 119% for the full year on a comparable basis, growing comparable digital content sales to $483 million for the full year. Digital content sales are defined to include digital books, digital newsstand, and the apps business.

“We grew our business in 2012 while continuing to make the necessary investments for the future of the business,” said William Lynch, CEO of Barnes & Noble. “In digital, our Nook content sales continued to explode with 119% year-on year growth. In the quarter we also announced a historic new partnership with Microsoft that will include a significant investment in Newco, and that will capitalize the company to fuel continued growth in digital and international expansion. Lastly, we announced Nook Simple Touch with GlowLight, that we started shipping in the first quarter of fiscal 2013, which has quickly become the highest rated eReader in the market. At retail, we had a terrific year growing comparable bookstore sales 4.5% for the quarter and 1.4% for the year, a result of our effective new merchandising efforts and continued industry consolidation. As we look out to fiscal 2013, we feel the company is strategically well positioned to grow value for shareholders.”

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Francis out at JCP, already?

BY CSA STAFF

PLANO, Texas — Investors who were holding out for some of MichaelFrancis’ Target marketing magic to rub off on JCPenney will be left wondering what could have been, as the company announced Francis’ departure effective Monday.

CEO Ron Johnson will assume direct responsibility and oversight of the company’s marketing and merchandising functions.

Johnson said, "We thank Michael for his hard work at JCPenney and wish him the best in his future endeavors."

As often happens with these sort of announcements, no detail was given on the reason of the departure. However, with the company reporting a net loss of $55 million, or 25 cents per share, and a comparable-store sales decline of 18.9%, assumptions will no doubt be made.

Francis was brought in as president of JCPenney on Oct. 4, by fellow former Target executive, Johnson. At Target, Francis served as chief marketing officer since 2008, previously serving as EVP marketing from 2001, and helped shape the retailer’s image as a fun, trendy company. Johnson saw potential in Francis and in newly imagined department store experience.

It looks like that experience may be put on hold.

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