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  • johnny_the_investor johnny_the_investor Aug 18, 2012 6:43 PM Flag

    WAG mistakes that have caused billions

    1- WAG management could not negotiate with ESRX that caused billions so far and most damages will be permanent.
    2- -After losing a huge amount of money, WAG managent had no chice but accept ESRX conditions with no question.
    3- Forced by losing sale, WAG bought Boots at very high price to compensate for loss of customers at home. The deal was the worst one in WAG history since Boots is affected by slow down in Europe while WAG is paying premium price for a company that may bring billions of losses for WAG.
    4- Losin revenue and income, WAG shares were sinking that scared both the shareholders and management. The worst solution was to raise dividends while the company was facing lower income.

    The risk of holding WAG shares is very high. Shares are diluted and if Boots under performs(most retaillers will under perform in Europe) then WAG will be in a serious problem.

    Current WAG is not the same one it was used to be. Current WAG is loaded with debt, diluted shares, smaller customers and very risky business in Europe.

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    • Billions?

    • I think salmon got a good point and he is not digging Skinner but people around him.

      I do not think WAG can compete with companies who focus on US.

      Very bad timing for WAG to get involve in Europe and bad timing to throw billion of dollars at one speculation.

      When the house in trouble, the first priority is to fix it before advanturing for international with many barriers.

    • Salmon:

      Stop digging yourself into a deeper hole with a poorly worded statement, about Mr Skinner abilities to deliver results.

      He has been one of the longest serving board members at Walgreens (I'm sure it was not for the money) and he has provided access to improve children's medical services with the Ronald McDonald Houses.

      Corporate management is selected by the largest investment holders, by the good graces and access they receive from these managers.
      This changes as Risk takers lose money.
      Financial engineers with consulting fees are deployed, idea's of capturing the Sushi Market and differentiation of consumer products become the buzz words.

      This is the history of high flying Corporate managers who tenure has been decreasing, now to a average of 5 years.

      I focus on this sector because this is where Hugh sums of money will be spent and profits will be made..

    • salmon,

      I have said, for some time, that I think Walgreens way overpaid for Alliance/Boots. Just like they way overpaid for Duane Reade. They have shown a propensity for largesse (or naiivete) in ACQ's, for some time.

      However, A/B was not under duress for money, was not over-leveraged and remained profitable. There was no financial immediacy to doing a deal with WAG, or anyone else. It is on public record that both Pessina and KKR intend to hold their WAG shares for an indefinite but lengthy period of time. I have to believe them because KKR's PR has always been truthful (from my limited knowledge) and Pessina has an unchallenged, clean record as a savvy investor from my research.

      I see NOTHING in this deal that spells trouble, nor do I buy into your negative view that Skinner lacks or needs "young and sharp minds" to help him avoid further bad decisions by Wasson & company.

      I actually think Jim Skinner will do what I would do if I had his job... I think he will dump Wasson and a few other select operating exec's in Deerfield. And I think he will deserve his option shares and Chairman status if he accomplishes this.

      Stay tuned.


    • <<What do you have against older people, and why do you write off their experience and wisdom because of their age? Do you think Warren Buffett should be put out to pasture, too? George Soros?>>

      Oh, do not take it wrong since sharpness and aging do not come together and that is a fact of life. My personal observation in many friends, colleagues and even some family members who passed 65 years old and once they were teaching at universities or practiced medicine, law and engineering. Very sharp and dynamic people in their 40s, 50s. They do not deny it either for their slowness.

      Anyway, there are always some exceptions. However, people like Buffetts and Soros mostly depend on young and sharp minds for research and main work while they just lead the overall plan. No wonder that Buffett announced his retirement.

      Skinner may be a good leader but it is surrounded by people who are making huge mistakes. He may be able to erase one or two obvious mistakes like ESRX deal but he could not erase every mistake that comes his way.

      A decade or so ago when most oil companies plummeted, Dynagy, an oil and pipeline company was in trouble financially(DYN went BK recently eventually). Buffetts bought a Dynagy pipeline at ¼ of the price. It was one of the best DYN assets. Now compare this deal with the Boots deal since most retailers in Europe are in trouble and Boots needed money too. WAG handed them a price that they could not get probably in the Europe glory times either.

    • Your post lacks logical thinking.

      Alliance Boots was looking to refinance
      the KKR position and cash out certain investors.
      There were several suitors the biggest were the Chinese.
      This was not in the best interest of Alliance Boots Investors or KKR that invests in the free market.
      Cashing out 74 million shares and no one notices, Right!!!!

      If you believe what you are saying I have a safe investment that I will set up for you, I'll call it the "Rx commodity exchange" RxCE for Short, This exchange will be selling futures on generic prescription medications
      Globally, are you interested???


    • Hindsight is cheap. I could reel off a litany of errors for most every large cap stock because all of them mistakes. The point I would prefer to focus on is how will the new team led by Skinner shape the future of Walgreens? I think that the results could be quite interesting, especially since he led international expansion at McD and that seems to be the new WAG direction. My sense is that the euro-collapse has largely bottomed except in Greece, Spain and Portugal. More room for growth than further decline.

      The other point I would focus on is the healthcare debate and how Medicare and Medicaid evolve, post election. The outcome of this debate is likkely to be far more impactful than the ESRX impasse, IMHO.

      Good luck to all.


      • 1 Reply to big.yank
      • B/Y :

        "The point I would prefer to focus on is how will the new team led by Skinner shape the future of Walgreens".

        Walgreens has not changed.
        The addition of Mr. Pessina and Mr Murphy Alliance Boots/KKR to the Board of Directors, shows another concession for the Merger.
        See SEC 8K (Walgreens) reporting a change in Corporate by laws.
        Although I like Mr Skinner's appointment, time will tell how this Global strategy works out, for Walgreens
        as for Alliance Boots this is the Window they have been seeking.

        As I see it the only change that has occurred is venturing into Overseas markets with additional risks in countries that
        control and regulate Rx spending, Not exactly Walgreen's strong point.
        This combined with the issues of consolidating purchasing, billing, IT systems from all the M&A's over the last year
        and financing debt will add pressure to SG&A costs.
        Also, now they are focusing on international Warehouse purchasing/distribution 101.

        Sourcing/Manufacturing from Foreign countries presents many problems, some that are very expensive to resolve, when these
        products are not up to US standards, the end users will reject them.

        As for the USA Financing of Medicare and Medicaid, I believe we saw the first wave of costs reduction efforts when Esrx refused
        Walgreens offered RFP. I see more cost reduction issues in the future and technology solutions to appear as you and I have discussed,
        in our past posts, most which have been deleted.

        As for the future, CDS will have to adapt there SG&A costs to financial pressures of a slower Global economy, something that Alliance Boots has achieved
        and adapt to the facts that generic prescriptions will become a cost issue commodity.


    • Johnny, Unless you are part of WAG management and know more than some of the rest of us you should say that these thoughts are just your opinions and not necessarily proven facts. As far as the boots deal only time will tell. As for Wag's no experiance in Europe I have not read anything saying that the current Boots management is going to be replaced with any different management. I think they will leave it the same and it will do as good as it has been. I also beleive Wag got a better deal on buying Boots when Europe is down. I think Boots revenue will increase as Europe comes back up and they would have had to pay more later. I gained a lot buying Wag in pre-market the day the Boots deal was anounced thanks to short sighted investors of which there are many of them on this board.

      • 1 Reply to rowboat4988
      • You don't need to be part of Walgreens management to see many obvious and costly mistakes that they have made in past 2 years. ESRX separation in less than a year shaved over $10 B from market cap and several billions from revenue andd income. You don't need to be a rocket scientist to see this obvious mistake.
        When Walgreen bought Boots, many analysts and other people went thru the numbers and most were wondering about Walgreen action and the high price WAG paid. If Boots performs poorly or well in future, it is something to see. However, Europe is not expected to do well for many years to come.

        There were many other mistakes that Rob mentioned. So obvious that can not be ignored. I believe that same management will make more mistakes. Then how can WAG compete with CVS, WMT...that have vey smart andd experienced managements.

    • Hi Milo:

      Seeing Walgreens Strategy, or lack there of.

      I will add in my view on Mistakes.
      1) Walgreens selling its PBM, leaving them with no way to Administer/ Adjudicate Employer Claims.
      2) Do you remember the Flu projected revenue last year that fell flat.
      3) How about the million dollar pharmacy tech with a multi million dollar government settlement for paying Medicare/Medicaid patients to switch pharmacies.
      4) Walgreens Paying 500 million for names when they already had there own.
      5) Esrx impasse and walk away from a 5.3 billion dollar contract, with a
      failed disruption plan.
      6) A Rx retention projecting up to 80% presented to investors.
      6) Announcing the 7B+ Boots Deal and the S/P went down.
      7) Agreeing to a 31.** stock exchange price for 83 million shares for the Boots agreement.
      8) Announcing the ESRX agreement after
      earning guidance and the Boots deal announcement.
      9) Funding Global distribution with no experience outside of the USA.
      10) Moving forward on the Alliance/Boots Deal without Shareholder vote approval or involvement.
      11) Having Walgreens credit rating lowered to BBB

      I'm sure Big.yank will disagree on some of these points and add his own.

      I'll wait for the pull back, Walgreens did lose on the Esrx impasse and will spend in the next 3 Quarters trying to RECAPTURE IT'S LOST BUSINESS.

      As for the Global outlook???


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