Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
wickedone, your post on the Yahoo WAG board was outstanding. You might wish to reprise it here. There seems to be nothing but spam and CVS-board retards posting over there.
robb and I have been discussing that Walgreens seems out of its element in their dealings with KKR & Pessina. You put this discussion in excellent, thought-provoking focus.
Yank
LOL.
In an election year this is just SO apropos... "The buck stops here!"
LOL (again).
Yank
True, true EXCEPT... the last A/B deal was never submitted to a proxy vote, nor were two new Board members affirmed by existing shareholders... so why would the Deerefield steamroller quit steamrolling?
If Pessina/KKR attain 51% common share ownership, they can outvote all other shareholders, combined. If they take WAG private, they can then actually DO your points 1 through 3 and axe any suits that object or try and get in the way.
The metrics of such a deal done this way are not all that outlandish because Pessina/KKR is actually leveraging WAG's own money to buy a majority of WAG while unloading most or all of Alliance Boots debt. One huge winner. One huge loser. One surviving global organization with likely slimmed down investments in a narrower spectrum of wellness adventures.
GLTA,
Yank
Excellent points, robb. Pessina/KKR definitely is the new sheriff in Wagtown.I have a developing theory on the 55% balance of Alliance Boots. There have been several clues dished out that the full deal for all the A/B marbles might close sooner than the announced window. Suppose such a deal was structured on a 100% stock basis, giving Pessina/KKR something like 25% of WAG's common shares. Then KKR/Pessina purchase another 26% to have full voting control, then take WAG private.
I have thoughts that I will not post publically on why this strategy might make sense for them. But the partial motivation would definitely include the path forward to making money with these assets.
Thoughts?
Milo, there are around 14 analysts that follow WAG... only a few upped EPS estimates when the ESRX dispute was resolved. Nine of them withheld revised guidance until FY12 results were announced. It is my belief that the increases recently updated reflect the elimination of the possible Medco uncertainty and the positive spin put out by Pessina on the combination of Walgreens and Alliance Boots. The fact that WAG frontloaded some portion of the AB acquisition costs in Q4 would tend to corroborate that WAG was grooming the prospects for FY13. JMHO.
Yank
All excellent points, robb. The one mitigating influence could be, however, that Pessina and KKR need the other 55% purchase to go through and so, for the immediate future, it is in their best (self) interest to see that the early results from the A/B deal are nothing short of stellar. Could make for a rewarding year or two of S/P-enhancing numbers...
Is the Wall Street Casino allegory pertinent, here? I think that the Barclay's analyst would affirm this after her extensive comments on the confusion of apples-to-oranges complications from the muddle of actions undertaken by WAG's acquisitive management team. Then, again, I do enjoy an occasional few hands of blackjack in Vegas, so I will keep an open mind and try and sniff out the opportunities IF Walgreens ever reveals the content of their strategic business plan for betting the farm on Alliance Boots.
I think "zombies" is a little too extreme for my portrayal of Deerfield "suits". I actually think they more remind me of the Goth's in the Capital One advertisements... all they need is a bleating goat at the next shareholder extravaganza at Navy Pier to complete the deal!
GLTA,
Yank
Decline in September sales numbers is not a sign of recovery from the ESRX debacle. Granted there was only half a month in which to begin the process of winning back Rx's lost to competition, but it does not appear that any swift and meaningful recovery is reversing the lost Rx count.
There are some warning sinals in RAD's 10-Q that may portend other problems ahead for WAG, as well.
robb,
I think that WMT will continue to advance through their Q3 results as I perceive that layaway will be HUGE for them this holiday season. Read my post on the I-Hub WMT board for details.
I will pare back or sell all my WMT position in January, or slightly before if the S/P nears $80.
My spin on the election is mixed. I suspect, barring a debate miscue, that Obama wil narrowly retain the Presidency. But I fear that a congressional and senate realignment will doom Washington to yet another 4 years of bickering and partisanship. The Fiscal Cliff will be the first showdown and possibly the last attempt at conciliation before class warfare ensues.
GLTA,
Yank
Milo, I think that your recollection is correct... Rein was "The Artfull Dodger" of conference calls... by the way, did you ever see my mock interview between Rein and CNBC's Maria Bartiromo on the Yahoo message board? It was a CLASSIC! Of course, it was deleted as were most other posts with any pith, content or relevent sense of humor.
I still believe that a move as huge as Alliance/Boots must be fully explained if investors are to believe in future trading prospects. Then, again, I am fairly Old School in my thinking...
I traded out of 2/3 of my equities, today, and will be in cash for the foreseeable future until the election concludes and I have a sense of how the fiscal cliff will be addressed. My 401K holdings are almost totally in overseas funds or small and midcap holdings and out of S&P and Dow equities.
Hate to be a scaredy cat, but I grow more risk averse as my age nears the threshold of mandatory cash-out.
GLTA,
Yank
A few items "missing in the conference call... an update on the accretion to earnings for the Duane Reade acquisition... a broken out report on Take Care clinics performance... results from the home infusion segment... online sales enhancement from the Drugstore.com acquisition... benefit to shareholders from customer-centric retailing initiative...an explanation for rising SGA beyond costs of A/B purchase... "blah, blah, blah"...
The Barclay's analyst really nailed it when she stated that the results were so convoluted and impossible to compare that most forward estimates were virtually meaningless. WAG shares touched a new 52 week high, this morning, but before euphoria sets in let's all remember that "the 36"s" used to be the BOTTOM of the WAG range, just a few years ago.
I have rarely encountered a major publically traded equity like Walgreens that spends SO much shareholders equity on acquisitions and diversified strategies, then gives NO accountable data on how those initiatives contributed anything to the investors that footed the bill. Strange. Very strange. Carl Icahn could do wonders for this enigma.
What a total shame that an MD would risk his license and the lives of patients by over-prescribing narcotics. It's easy to blame the users like Michael Jackson for the illegal dispensing, but in the endgame just two gatekeepers control the distribution... the prescribing physician and the dispensing pharmacist.
Thank God that there are responsible PharmD's at many Walgreens and elsewhere that look for such abuses.
The situation in Florida with the DEA initiative indicates a less than stellar corporate response to an obvious issue with controlled substances fueling abuse of prescription drugs in that state. It will be interesting to see what Walgreens (and CVS who was similarly cited) does to respond to assertions that their actions... or lack of intervention... contributed to the problem.
I think robb was correct to keep this topic in the forefront. This is much larger an issue than I supposed at first blush.
Yank
"The DEA's got a chopper in the air..."
-Stephen Earle
"Copperhead Road"
I find it quite remarkable that Walgreens Florida store throughput on controlled substances accelerated so much faster than overall marketplace demand. How could such explosive growth of narcotic medications go unflagged, undetected or unquestioned at the Jupiter, FL Distribution Center? How could certain stores with mega-increases in sales of such medications not note and question the appropriateness of so many transactions involving controlled substances?
For fairness, I note that CVS has an apparent problem in this arena along with Walgreens, as does Cardinal Healthcare as robb earlier reported. However, it is Walgreens with an apparent inclination towards drug wholesaling, that strikes me as having the most forthcoming explanation to shareholders, let alone authorities who track such anomalies.
This is a serious question that deserves some serious management commentary in a public forum, not just to be swept under the PR rug of of food deserts and sushi prep of California Rolls at the corner of "Happy & Healthy".
GLTA,
Yank
Do you think that Walgreens "looked the other way" because sales of controlled substances in an undisciplined way helped kite earnings and, hence, management bonuses?
This would be a serious impeachment of senior management's integrity and eligibility to further serve shareholders, if true, IMHO.
Would the higher margins on generics include Roxane Laboratory products such as Roxies, Blues, Berries and "30's" and similar oxycontin generics? Do you think that the DEA may have been onto something in Florida?
Maybe robb was really onto something with his earlier posts(?).
I think that you will see your $80 S/P and then some when Q3 numbers come out around New Years. Layaway is going to be HUGE for Wally this season... the lines are already incredible. Walmart is going to run TWO Black Fridays, not just the traditional day after Thanksgiving. I think WMT's topline numbers will be blowing away Best Buy this season.
wickedone, we have all been predicting margin pressure on retail pharmas as a derivative of competition (Walmart), lowered reimbursements (PBM imperative) and healthcare reform (Medicare/Medicaid budget cliff). I agree with you that Caremark matching the ESRX lowered reimbursements is a given; they must remain competitive or put contracts at risk for value seekers constantly looking for ways to moderate rising overall healthcare costs. The statement used to be "Cash is King" but that has now been replaced with "Cost is King"... never a Walgreens strength.
There is a clue in yesterday's PR and the extraordinary highlighting of dividend/buyback spend as a plus for shareholders. WAG spent $1.9 billion on these items in FY12. That's all well and good, until the cost of such programs gets considered in the competitive matrix. Also ignored is the buried truth that the Alliance Boots deal actually re-diluted virtually ALL the shares WAG bought back over the last 5 years... a small "problem" that is conveniently skirted amidst all the grandiose corporate self-aggrandizement and congratulatory back-slapping.
When Walgreens "(empty)suits" bleat poverty and screech publically about unfairly lowered reimbursements and "mean old Mr. PBM" they ignore the hard truth that their inability to comply is a self-inflicted wound... not an inevitable and undigestible affront to ALL players in the Rx space. M&A costs, new debt cost, SGA bloat and a new loyalty program all add to the seperation of Walgreens from more cost-limber competition (other than maybe debt-ridden Rite Aid, as you correctly note). Walgreeens competitors simply do not carry these burdens to any major extent.
I am not widely experienced in the metrics of drug wholesaling so I can't say with conviction whether this direction tilts the balance more towards Walgreens in the future, or not. What I can say is that WAG needs to say a whole lot more about its strategic vision and business plan or they risk appearing to be throwing the kitchen sink up against the ceiling and hoping it sticks.
GLTA,
Yank
I read the Adam Fein link, earlier; very interesting.
The whole "wholesaling" direction is interesting, IF it plays out as a defined strategy that Walgreens announces... if it EVER chooses to divulge its business plan for spending some 10% of total revenue for 45% of the A/B acquisition. However, I must once again note that prior M&A that included clinics, home infusion, Drugstore.com and Duane Reade has NEVER been properly been directionally or strategically explained, let alone been accounted for to shareholders that footed the bill with shareholder's equity to fund these adventures.
"Worry, worry, worry..."
Yup, I am worried that this Alliance Boots deal is just another smokescreen to obscure horrific comps in a mire of obfuscation. I think there are interesting possibilities, here, but Investor Relations 101 calls for a detailed strategic explanation and, as of yet, I must have missed the PR... or Deerfield chose to "screw the kitty" one more time.
Regards,
Yank
The only CHAD I have any interest in is Children's Hospital at Dartmouth, I'll have you know... LOL.
I think that the question of future asset deployment is pivotal to the forward interests of long investors, here. I am not saying that there is a problem... nor am I saying there isn't. What I have been saying for some time is that there is a serious question of appropriateness of two board members with possibly conflicting or misaligned interests nonetheless representing all shareholders in the way future M&A spending is directed.
I have never been possessed by "the glass is half empty" negativity as an operating precept, but... something appears a little awry here and my warning beeper has been sounding the silent alarm for awhile, now. I want to see some concrete and detailed strategy statement regarding business plan before making another commitment to WAG shares since a lot of gamesmanship is the legacy of Wasson and Miquelon, IMHO. There was NEVER a followup strategic commentary or posting of results of major WAG acquisitions made in home infusion, clinics, DSCM or Duane Reade. This is looking a lot like a Best Buy redux where management bleats "Trust Us" and the results tell an opposing tale of the tape.
GLTA,
Yank
"The first cut is the deepest!" Here's my early spin on Q4 and FY12 results:
The most telling commentary is the following: "The company intends to account for its 45 percent investment in Alliance Boots using the equity method of accounting on a one-month lag basis. Because the closing of this investment occurred within one month of the company's fiscal year end, the results of operations of Alliance Boots GmbH are not reflected in the company's reported net earnings for the fiscal quarter or year ended Aug. 31, 2012." Very interesting tactic.
It appears to me that Walgreens M&A, which further muddles the Q4 earnings per share comps with last years sale of WHI, renders traditional forward projection metrics meaningless. I say this largely because 55% of A/B still hangs in the balance and can continue to obfuscate comps as the remaining portion of the acquisition can and likely will be timed to make traditional EPS comparisons nearly impossible. It appears that WAG has groomed the books for a plus to forward EPS, but I just can't say for sure with so much GAAP garbage to navigate.
Thus, guys, S/P momentum all boils down to conviction in the business plan. I thought the numbers in today's release were fairly decent... perhaps better than I expected... and I was surprised when WAG opened down so much. It has since recovered somewhat. But I don't see a lot of S/P movement likely here for quite some time, other than moving with the market or with other news. Consequently I will not be opening a new position in Walgreens until there is more to go on and until some time has elapsed where the impact of extreme M&A (for a formerly conservative management enterprise) can actually be reflected in an apples vs. apples comparison.
The divvy, here, is small compared to other opportunities and I do question any further increases based on the added debt WAG is assuming to purchase A/B.
GLTA,
Yank
Hi guys! Back from Florida... bought a real nice golf course condo in a primo location. Now it's back to reality.
Pre-earnings action on Walgreens is positive. I am looking forward to the C/C and guidance.
Yank
Follow-up question to Walgreens investors on Alliance/Boots...
Is Pessina's role on Walgreens Board of Directors a conflict of interest with his role at Alliance/Boots, or vice versa? It strikes me that Pessina may be steering deals that enhance his eventual position as substantial owner of the balance of A/B shares by creating a larger entity that Walgreens is required to purchase at some later date.
I do understand that Pessina owns a huge chunk of WAG shares so I am not inferring that his views are totally unaligned with other shareholders. However, he potentially stands to gain more by enhancing as a board member the value of A/B as it heads towards the 2nd tranch of acquisition, compared to other outcomes including alternative M&A, dividend enhancement or share retirement with buybacks, etc. which might be more immediately beneficial to pre-A/B Walgreens shareholders.
Again, comments appreciated.
Nanjing did $3.2 billion in pharma revenue for the latest reported period. $91 million for 12%... not so bad a deal, at first blush, that Pessina put together.
Any opinions on what M&A like this does to the purchase price of the remaining 55% of Alliance/Boots that Walgreens has yet to consummate? Does Walgreens now own 45% of 12% of Nanjing, or 0% of Nanjing? If more and more deals like this are planned for South America, did the purchase price for Alliance/Boots just escalate?
This is a HUGE question for shareholders.
Did Walgreens enhance its future with overseas diversification... or... did Walgreens risk everything and bet the family farm on a global adventure in an as-yet-to-be-defined and unannounced re-strategization of its existing business plan?
If I were an institutional investor, one of a number holding about 2/3 of WAG's total common shares, I would be scared to death to be placed in this Never-Neverland with so little concrete direction or guidance on what all this means. It almost looks like Walgreens has ceded directional control to KKR/Alliance/Boots and Skinner and the original Board have been relegated to irrelevent status as "bit" players in a bigger game in which they are sitting on the bench.
Thoughts, anyone?
Yank
Hey Walgreens found another way to be Number One... as the leader in controlled substances!
Those DEA numbers are simply stunning.
OT to robbsbeach: sent you an e-mail. Please check your Yahoo inbox. If I do not reply right away, I am travelling after tomorrow for 10 days.
Regards,
Yank
I would not be in the least surprised to see a broad market pullback from this week's levels as the rosy glow of QE fades into the grimmer reality of a tepid economic recovery. My concern with shorting bank stocks would be a possible Romney win in November which the market might read as the upcoming repeal of Dodd-Frank right after Inauguration Day. I think I would want to be out of any short position prior to the election.
Good luck!
What the DEA has been tracking is abnormal activity, huge quantities flowing through retail distribution, that should have red-flagged potential abuse of controlled substances. This is a corporate issue, not a pharmacist issue, although in the CVS example two individual pharmacies were cited for excessive volume in oxycontin and oxycodone. Normally I would expect that the Loss Prevention Department would have the responsibility to identify and investigate abnormalities in this area.
A pharmacist's sole responsibility in dispensing such medications would be identifying potential interaction problems, or perhaps calling the MD that wrote the script to question an extremely high dosage.
The DEA suspended the distribution of controlled substances from several CVS stores in Florida earlier in the week. They are correctly cracking down on the abuse of pills, and specifically oxycodone, in the state of Florida... like many other states... that have an enormous drug abuse problem with prescription medications.
This is a very appropriate reaction, and one that all of us should SUPPORT as it begins to address a huge social problem in the U.S., and other parts of the world, as prescription medicines have become the playground of addicts, junkies and weak-minded abusers.
We should ALL support these actions.
Walmart FINALLY showed uptick in SSS comps, after years of downtrend. SGA cost savings, long-promised, finally kicked in. And high cost store count domestic growth was replaced with "harvest vs. overlap" strategy, shifting metric growth to new, overseas markets. Plus, grocery intiative began to pay off as size leverage yielded cost advantage vs. competitors like Kroger and Publix, and other competitors like SuperValu and Winn-Dixie fell on hard times after years of ignoring price leadership in a highly promotional sector... kind of reminiscent of J.C. Penney's recent meltdown in the broad retail department store market.
Walmart's initiatives to commoditize staple items at low retail prices has shifted major consumer share with leaders like "Great Value" grocery items, $4 Rx generics and HABA staples like Equate pain relievers, vitamins, shampoo, bandaids and OTC med's.
It took ten years to reach that $75 plateau. I do not think it has peaked. I think you could see $90 in another 2 quarters, at which time I would likely sell my position... among my largest.
GLTA.
Another huge CNBC plug on Squawk Box, this morning by Cramer & Company. Cramer was singling out LNG as preferable to CQP, but I think you really want to own both. Don't wait until 2015 to jump on this bandwagon or you are going to pay a whole lot more to capture a potential ten-bagger when nat gas actually loads on the first tanker for export shipment. This is the kind of opportunity that comes along only a few times in a lifetime of investing, like with Amazon (my best trade, EVER) and with AAPL or PCLN (missed both, too conservative).
JMHO.
Are we moving toward cafeteria-style PBM networks? My analysis of Paz's comments, the Tri-Care exclusion of Walgreens from the ESRX settlement and Lisa Gill's enlightened spin all lead me to conclude that this is the new PBM direction with regard to higher cost providers: let the customer decide if they wish to pay more for more expensive delivery of healthcare.
I think we all comprehend the momentum underpinning lowered reimbursement rates and improved healthcare cost metrics. This pressure is unlikely to abate as the entitlement deficit debate continues, irrespective of November's election results and whatever political capital that may accrue to either side of the aisle.
Cafeteria-style options was what virtually killed the HMO sector when people were clearly presented with having to pay the higher cost of upgraded networks and convenience of services. Could we be seeing the initial phase of such an approach entering the Rx market? The first true confirmation of this will be either another major player like Tri-Care opting out of Walgreens OR either UNH or CVS announcing a narrow network with a high-count insured system such as Calpers.
Thougts, anyone? This issue is HUGE in shaping the future of Walgreens and in interpreting whatever guidance that comes forward on 9/28 in the conference call.
$36.16 closing price... nice. FED forward commentary affirms low interest rates through at least mid-2015. If the economic recovery remains tepid, you will see mReits continue to advance in S/P as long as dividend yield exceeds 10%. You just need to stay on top of changes to book value. JMHO.
QE impact, exactly as I expected. Bought @ $37.02. Sold @ $40.99 after the news hit. Thanks, Ben! My mReits thank you, too... flat interest rates through mid-2015. God love ya!
Thanks. Milo. I actually find I-Hub's news links and other features to be helpful, as well. I really dislike what Yahoo has changed in their message board format, plus they provide a platform for terrorists... a fact I simply cannot support or patronize. The guy I took issue with that Yahoo refused to delete actually posted a homage to the 9/11 terrorists, claiming the victims died "to give glory to Allah." I will not post messages on a media that supports reprehensible, un-American values and exhorts other Muslims to kill Jews and American service-people serving in Afghanistan, among other treasonous and genocidal comments contained in his posts and Yahoo profile that Yahoo refuses to delete.
I am working on a small real estate deal, will be travelling and probably off-line for awhile. Catch you when I am back in town unless I find a spare moment in a very busy agenda. I will return in time for Walgreens conference call, and I am sure I will have plenty to say at that time.
Yank
QE and my post on 9/7 on high quality banks...
I sold on the news today (GS & JPM) for a huge one week capture, over 100% rate-of-return, annualized. I hope you guys followed my advice. This was an AWESOME day for me!
Uncertainty remains as 9/28 and the conference call for Walgreens approaches. I cannot and will not predict how the outcome will play out. Could be good. Could be neutral. Could be bad. If history holds, volatility will increase entering the week prior to YE earnings, plus lots of new posters emerge (or at least used to on Yahoo Message Boards) promoting either an up or down case, only to disappear a week later as the dust settles.
I remain neutral, but locked and loaded to react on real news.
GLTA.
p.s. The CVS Yahoo message board has now degraded to almost as low a point as the WAG board. Thanks, "InvestorsHub" for a better platform from which ideas and content can be shared and discussed that benefit all investors without childish distractions and gamesmanship!
Porgie Tirebiter... are you still following this stock?
You expressed concern, awhile back, over the growing debt and declining bond ratings for Walgreens. What's your take on the latest bond offerings and debt restructure vs. the Alliance/Boots acquisition?
The broad market spin seems to be averse based on declining share volume. WAG only traded about 1/3 of its normal shares, today.
Any thoughts?
May touch $36, today!
Dividend is reaffirmed.
This mReit is a goldmine. Only upside fom here unless interest rates rise.
We have entered the Third Dimension of record one day rubbish in SEC confusion. No simple, explanatory PR. Just hundreds of pages of excessive detail so repetitive and voluminous as to be useless to any analyst trying to decipher the Alliance/Boots deal.
This is the kind of crap that the bloggers at Seeking Alpha and Motley Fool love to jump into with arcane interpretations because real analysts have better things to do with their time than read the next "War and Peace" convoluted into GAAP-speak.
This is senseless drivel. It's like an entire school of red herrings just looking for a net. And that ain't "net profit."
Is Walgreens apparently rethinking the La France acquisition?
They announced in June that they would close in September on this 144 store acquisition for $438 million. Today they announced that they are closing over half the newly acquired stores, which surely will generate a ton of severance and closure costs, plus erosion of the former customer base.
Does anyone think through these deals? Seriously.
Today's SEC filings tell tales about Q412/FY12 results coming 9/28. Distractions from WAG YHOO board are expected since that media is now lifeless.
Be careful.
GLTA!
My target buy-in is $31.50 but only after/if I am satisfied with the outlook for the merged entity as projected in the C/C. I will not take a position of over 5k shares, to start.
I agreed with Citi's "sell" recommendation but I think Weinswig's $27 target is now just too extreme to be credible unless there is more bad news to come, which I doubt. I think her # included the potential, upcoming loss of MHS Rx volume which actually exceeded ESRX's, which is now off the table (unless there is other "hidden" PR like the Tri-Care surprise). Had WAG & ESRX not settled and MHS volume was further lost, I think her number was only a tad lower than I would have projected. Integration of WAG and A/B is not likely to be easy, and as Weinswig pointed out, Walgreens has zero experience navigating a global merger this large and this complex.
I hope you are correct with your prediction on Wasson's possible exit; just remember that there are two, other members of The Liar's Poker Team... Wade and Kermit.
Nice post from you. Thanks!