First and foremost, WAG has always had the ability to man up and just settle with ESRX. If this happens, their stock would see an immediate 10%+ bounce-back. They would then have years to work on new margin sources to offset the reduced reimbursements. I do think a major management change would need to transpire for this to happen... at least Wasson and Crawford... but a board intervention could force the issue. Remember that Walgreens (intelligently, by the way) loaded their B-o-D with outside/non-Executive Directors. A settlement with ESRX would lead to an absolute slaughter of shorts, IMHO.
I do not think WAG can afford to or will lower its dividend. I do believe additional share buybacks are unlikely and, interesting to note, no new one was announced at Navy Pier this year. Earnings can and must be kept at least flat and that can be accomplished only in two ways. Close a lot of underperforming stores (see my October post "The Armageddon Chronology") or buyout Rite Aid and force ESRX to capitulate. I actually believe that the latter is the more likely, explaining why I more than doubled my position in RAD 60 days or so ago.
This is a very fluid scenario. I have stated previously that I would not go either long or short on either Walgreens or Express Scripts because a massacre in the evolving impasse is entirely possible, maybe even probable. I have better opportunities on my radar. Take a look at CLNE if you think LNG has bottomed. I have traded in and out of it for years and will be going long again, next week. Cramer hinted that Obama might force the USPS to go 100% natural gas and, to me, CLNE is the likely primary beneficiary in such a deal.
I just read your post on the RAD option, A buyout offer could be possible as I see it also, Walgreens moving into this direction would force another Retailer in the Rx sector to make a counter offer. And you know, Walgreens would face overlap issues that would be exploited in negotiations. I'm looking at March as the point of no return for Mr Market insiders. Although, I have not bought that position YET.
As for the B-o-D they appeared to be very content in the position taken against Esrx. And looking at the Voting results I expect no change. I believe this Board met 4 times last year. Active boards engage in business directional planning, and Auditing. IMO, the Sushi spend, Esrx impasse and past stock buybacks shows the activity level here.