Walgreen buying drugstore operator Duane Reade, would add 257 stores in NYC metro area

Walgreen buying NYC drugstore operator Duane Reade

DEERFIELD, Ill. — Walgreen Co. said Wednesday it has agreed to buy the drugstore operator Duane Reade in a move to expand operations in the New York City metropolitan area.

Walgreen, one of the nation’s biggest drugstore operators, said it would pay about $1.08 billion including an undisclosed amount of debt for Duane Reed Holdings Inc.

Duane Reed, which has been operating in the New York area for 50 years, is currently owned by a group that includes affiliates of the buyout firm Oak Hill Capital Partners.

The deal, which requires regulatory approval, would include all 257 Duane Reade stores in the New York City metropolitan area, along with the corporate office and two distribution centers.

Walgreen, based in Deerfield, Ill., operates 70 stores in the New York area and had 7,162 stores overall as of Jan. 31.

The company will fund the buyout with existing cash and expects the deal to close by Aug. 31.

Walgreen expects the deal to cut into earnings per share through the next 12 months, but the buyout will cut costs between $120 million and $130 million by the third year.

Shares of Walgreen fell 74 cents, or 2.2 percent, to $33.34 in premarket trading.