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  • big.yank big.yank Jun 22, 2012 1:36 PM Flag

    OT to robb, cmxgen

    Here's a wild one worth considering. What do you think about MCK taking out RAD to neutralize the Boots deal? RAD's debt would be too much for CAH to assume, and MCK goes head to head in many of Boots euro markets in drug wholesaling?

    I think like many that M&A will pick up as the dust settles from this adventure WAG is taking.

    Thoughts?

    Yank

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    • big.yank and Cmxgen:

      This is not about finding the penny dropped on the sidewalk.
      This is about a corporate operation's plan.

      In less than 3 months Alliance/KKR will become the largest stockholder of Walgreen, and with that
      comes influence and the ability to exercise authority/controll at the highest level.

      Walgreens C-suite failures over several years has placed the companies S/P and directional issues front and center, we saw it with CVS, Esrx, and today with a continious S/P trend downward.
      Dividend increases at this rate will
      not last forever with out a change in
      structure..

      I will wait until the Medco retail Rx RFP is announced which should be in the next 3 months, than, its a risk where Monte Carlo rules will apply..

      Regards,

    • You are entitled to your direction to ignore, and I often do not fully agree with cmxgen, but I do totally respect his very informed opinion as someone that knows a LOT about the retail Rx biz and personally lives it every day.

      There are a lot of things Walmart could improve at WAG, including vendor leveraging which they have perfected to savage degrees. There are other things Walmart has done, like scorecard computer scheduling, that if inmplemented would IMPLODE Walgreens into a morass of hideous customer care and even more hideous impact on costly misfill deaths.

      You have NO credentials to make such claims. Do some homework, dude, before you posture on a board with very informed followers.

      JMHO.

      Tata,

      Yank

    • If I were WMT, I would look to WAG b/c it will give them rev boost right away, and with money so cheap, it would make a perfect fit.

      However WMT prefers the grow from within model.

      WMT has much better purchasing and could improve margins pretty quickly.

    • big.yank you and I agree again, with the execption of partnering with a Rx
      manufactuer.

      UNH is in the business of Healthcare Risk, not manufacturing, but that is another subject for M&A discussions.
      Walgreens M&A was a defensive move as I see it, any future revenues seen from Boots will not be accretive for 1 yr and 3 month, also this deal will not be formalized until September.
      At that point Mr Stefano Passina will be the largest shareholder sitting on Walgreens BOD, and I think the Sushi servings will be replaced for these meeting.

      My outlook does not dismiss a Black Swan event occuring with the Esrx/medco contract or in Europe.
      Either way, Walgreens C-suite latest Earnings and direction has not impressed the Market.
      If you get my drift..

    • Walmart will NEVER buy out Walgreens. Too costly, too much debt and more on the way. And Walmarts low price strategy would never fit a Walgreens overhead proforma; remember, the future is generics and in Walmart parlance, that means low cost generics. Walmart doesn't want a 2 for 1 ratio of low margin Rxs to higher margin frontend goods. Trust me, I know LOTS about Walmart and own tons of WMT shares.

      PBM margins are extremely thin. This explains precisely why they are NOT going away, any time soon. They do not cost much compared to the policing savings that they stronghandedly deliver.

      I will be looking for signs that someone like UNH may seek to partner with generic produceds like Teva as the dynamics of the healthcare market M&A gain more definition. The Supreme Court ruling expected next week should be interesting to watch and interpret.

      Good discussion, all!

      Yank

    • I was just trying to point out some good things about what WAG has going for it. Another is that UNH's PBM is going to be able to get better pricing and thus compete with other plans better and gain even more clients. That will benefit WAG. UNH is the IBM of health care. No one is going to get fired by going with them.

      I will think about you the next time I have a California Roll.

      I liked the Boots buy when I first looked into it, then I hated it because I didn't like the debt that was being added and then I liked it again after doing more research. I determined WAG will cut back capex here in the states and that will add some more free cash flow for the Boots purchase and it is a good thing that WAG moves forward with or without ESRX.

      One thing I don't like about WAG is how executive compensation seems high and rewarding management for the number of new stores that are opened needs to be eliminated. That is a very stupid metric that does not reward the efficient use of capital.

      Thought I would throw that in there so you know I am not a WAG lover zombie. It's all just business.

    • I have been in these smaller stores that are larger than Walgreens.

      They have not refined this model yet!!!
      but they are working on it.

      Booths on the other hand has a much smaller footprint with a more targeted
      higher Gross offering.

      And they dont do Sushi!!!

    • PS - I stand corrected.

      WMT wants to open 10K sq ft stores and the average WAG selling space is 11K sq ft so I was off by 10%.

    • Robb. Do a little research on WMT and their plans to open smaller stores. Guess what? ... WAG store sizes would fit perfectly.

      This is going to play out very nicely and WMT keeps chugging along swallowing everything in its path.

    • ESRX has to keep buying other businesses to keep profits up. Very dangerous for a razor thin margin business.

      Everyone wants to rag on WAG but ESRX reported an 18% drop in net income last quarter because although their operating income was up their margins were down and they keep piling on the debt. Now they are over 10 billion in debt and have razor thin margins and they think they can keep marketing as a way to cut costs to HMOs PPOs and Employers when all they really are is an unnecceary middle-man who makes everything more expensive.

      WAG had a PBM before and they sold it but now it is time to take out the big guns and put a bullet in the PBMs.

      WMT has on their slate a buildout of small stores. WMT can kill two birds with one stone by buying WAG and they don't even have to buy the rest of Boots if they don't want if they don't want to increase their presence in Germany which they left a few years ago. Alliance Boots is big in distributing drugs in England, Norway, Ireland, France and Germany.

      It is a bit shocking to see everyone slam the deal with Boots when that company is a great company to partner with.

      WAG is already on the phone with the drug companies and they should get a better deal than ESRX. ESRX bought Medco to get lower prices and thought they were going to kill WAG on the drug buys. That plan is out the window now.

      GLTA.

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