US drug store giant Walgreens has agreed to buy New York-based Duane Reade in a cash transaction with a total enterprise value of about $1.1 billion from Oak Hill Capital Partners.
Financing for the deal includes $457 million in debt, according to the Wall Street Journal.
Oak Hill acquired Duane Reade, which was founded in 1960, in 2004 for $750 million. The firm invested an additional $125 million in the company last year to help it repurchase debt as it struggled under its $556.5 million debt load.
Walgreens expects the deal, which will include all of Duane Reade’s 257 stores, to close by the end of August. The transaction also includes the assumption of Duane Reade’s debt.
Duane Reade is the largest drug store chain in the New York City metropolitan area, Walgreens said in a statement. The company has been undergoing a restructuring over the past two years, including redesigning stores with wider aisles and contemporary décor. The company also has instituted a “doctor on premises” walk-in healthcare service.
Peter J. Solomon Company served as financial advisor to Walgreens. Goldman Sachs acted as lead financial advisor, with Bank of America Merrill Lynch as co-advisors to Oak Hill.
Oak Hill's acquisition of Duane Reade was not without controversy. In 2008, the company's former chief executive officer Anthony Cuti, and former chief financial officer William Tennant, were indicted for allegedly falsely reducing reported company expenses and inflating income from December 2000 to June 2005.
Duane Reade has a history of private equity ownership. The company was acquired from its founding family by Bain Capital in 1992, which exited the investment in 1997 to DLJ Merchant Banking Partners. The company went public in 1998, and was taken private by Oak Hill in 2004.
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