In the largest acquisition the retail pharmacy industry has ever seen, two
Rhode Island companies announced they would divvy up more than 2,500 Eckerd
pharmacy locations scattered through the East Coast and the South in a $4.6
billion deal.
Woonsocket-based CVS/pharmacy will pay $2.15 billion for about 1,260 Eckerd stores located mainly in Florida and Texas, the chain’s $1 billion mail order and pharmacy benefits management business, and three distribution centers.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
Warwick-based Brooks Pharmacy will take over about 1,500 Eckerd drugstores and six distribution centers located in 13 Northeast and mid-Atlantic states, as well as the chain’s Florida headquarters. Brooks’ parent company, Canada’s The Jean Coutu Group Inc., paid $2.38 billion for the Eckerd assets.
The deal was announced April 5.
J.C. Penney Co. Inc. had been shopping its pharmacy chain for several months, looking to improve its bottom-line figures and concentrate on its department store and catalogue businesses.
The deal will make CVS the largest pharmacy retailer in the United States, growing to nearly 5,500 locations in 36 states, and jumping past competitor Walgreen Co.’s storefront tally a bit under 4,400. CVS has grown mostly through acquisitions over the years, while Walgreen continues to build new stores, announcing plans to bring another 400 on line this year. Brooks, which had previously operated just 333 storefronts mostly in the New England region, will continue to remain competitive in the region and now places fourth on the list, trailing Rite Aid’s 3,400 locations.
CVS has already announced plans to add 250 jobs to its Rhode Island headquarters and both chains have said the majority of the Eckerd stores are likely to remain on line, although Brooks plans to eventually close the Eckerd headquarters.
Todd Andrews, a spokesman for CVS, said the company would begin converting its Eckerd store floors to the CVS name this summer, after the deal’s expected June closing. Beginning in Florida, Andrews said CVS is planning to spend between $300,000 and $350,000 per location as part of an effort to make the storefronts “easier to shop.”
The renovations will involve cosmetic work including lowering shelves to allow customers to see from the front of the store all the way to the pharmacy in back, along with new signage, improved lighting packages and the CVS carpeting that Andrews calls a signature element. Even with the cost of the work, CVS expects the new stores to add approximately $150 million to the chain’s 2005 cash flow.
The footprint of most of the acquired Eckerd stores is between 10,000 and 12,000 square feet, which Andrews said was in line with the size of an average CVS and made the acquisition deal so desirable. He said the look and layout of the converted stores would be similar to the recently expanded CVS location on Hope Street in Providence, or to the chain’s newer stores in Wakefield and North Attleboro. All renovations are expected to go seamlessly, not requiring any stores to go off line.
“We think of this as a natural progression,” Andrews said. “The bottom line is creating a drugstore that’s easy to shop from the front of the store to the back by the pharmacy. … Research has shown that people want to have a drugstore within two miles of their home and our challenge is to continue working toward that.”
“This acquisition is a unique opportunity and is consistent with our long-term strategy of expanding our store base in the high-growth Sun Belt markets,” said Tom Ryan, chairman, president and CEO of CVS Corp. in a release. “The demographics in these states are very favorable, as they are experiencing rapid population growth, particularly among seniors.”
