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Alliance/Boots... help me out here, guys!
I spent some time, today, reviewing again A/B's reported 2011/12 annual report and the metrics they report, which are not required to be in SEC detail. That, notwithstanding, and with currency valuations always a challenge in attaining equivalency, 16 billion pounds of A/B's revenue stream is drug wholesaling. Their actual retain pharmacy volume is teeny compared to Walgreens. Pessina has already spoken about exporting A/B's expertise in this business to WAG in the U.S..
I am sensing a genuine DISCONNECT since CVS surely will not enhance Walgreens by sourcing pharma from them, Walmart is already overseas/direct on much of what they require and most Indies view WAG as The Evil Empire. So... who's left with which to grow this new business direction, Rite Aid? Wow, there's a good credit risk.
What Walgreens could save by sourcing from itself as a drug wholesaler (if it had or acquired such a capability) would never pay out enough savings to justify the full price of a 100% ownership of Alliance/Boots, from what I see.
Discussion of this would be much appreciated.
Alliance/Boots dilution to 942 million oustanding shares will effect Walgreens FY EPS due out on 9/28. In effect, all the share buybacks of recent years are wiped out by the first tranch of the acquisition of 45% of A/B. For the dilution to be net-neutral to EPS, 45% of A/B's net income must fully offset this approximate 10% hit. That's a lot to accomplish.
I think THIS is what Deborah Weinswig was contemplating when she projected the $29 forward share price. Hey, you guys do the math and stay long if you wish, it's your money, but I think robbsbeach's play with KKR may make more sense from a "capture" perspective than having a large, naked long position going into earnings.
BE CAREFUL!
Agree totally about the scare tactics to ignore. I quit reading Seeking Alpha, other than for giggles, and I now sleep better and enjoy better returns. I do not own oil trusts, but I am very long on Cheniere Partners in nat gas which pays a very solid divvy.
Thanks for your reply. Good luck.
Cramer continues to plug for Nat Gas growth to fuel surface fleet and jobs to end recession. This is going to overcome supply glut and low commodity prices as investor enthusiasm grows after the election. If Israel bombs Iran nuke sites, multiply times five.
Smart to build a position now.
GLTA.
Touched $35, today.
Will close above $35 with market pullback, next week.
JMHO. This is my largest holding, and I am in since $28.50.
Housing market upturn is just around the QE corner.
These dips occur with virtually every rights offering from every mReit and the retail sheep flee, fearing the dilution boogie man, creating another buying opportunity for me.
I wish amateurs would quit buying mReits with no understanding of how they work or pay off. I watched a bunch of them get decimated because of GAAP accounting reconciliations that mean nothing regarding forward dividends or book value. Then they inevitably bounce back and go higher as the asset value enhances book value.
I have a mid six-figure portfolio of around a dozen mReits and I am up over 23% YTD against an S&P rise of 11.85% and I did just as well last year, playing the same game the same way with just minor adjustments.
Milo, I am still sitting this out and awaiting the 9/28 conference call and forward guidance, not that I will necessarily take it at face value. I know that you like Wasson, but I think there is a 40%+ chance he will be flushed at that time and I would view that favorably.
Walgreens has a great brand platform and an enormous, somewhat entrenched Rx customer base and a dominant share of prime real estate in this sector. The Euro-expansion has enormously benefitted Walmart and could do the same for WAG if they choose to commoditize generics and drugstore staples, per the Walmart strategy here in the U.S. but I need to see some defined plan defining the future for Alliance/Boots.
I have said, previously, that I need to be comfortable with the rationale for the accelerated A/B purchase. If it was simply done, as ohers have suggested, to conceal the horrific metric impact of the ridiculous ESRX impasse, I will pass on another position, here. If it was done to fast-forward to an unemcumbered merged entity with consolidation costs off the books and a clear course forward... I might take a significant position, like 5K to start, and then see what develops.
I foresee no further buybacks and a slowed or zero growth rate in dividends, here, because of the added interest expense in closing out 100% of this deal. Interest rates are low which, I grant you, makes the timing of this deal fortunate. However, unless I missed something, I still believe Walgreens overpaid for this deal and Pessina and KKR took them to the woodshed of the unlubricated.
GLTA.
My "wish list" for a new Walgreens spokesperson is sadly limited by the unfortunate deaths of Charles Ponzi, Bernie Cornfeld and Bernie Madoff's prior commitments to another institution. Even less qualified candidates like Britney Spears have recently been tied up with new gigs.
Maybe other suggestions could include Nancy Grace, Barry Bonds or Pinocchio.
WAG continues to trend downward, again, today. Hey Milo... still think Citi's Deborah Weinswig was far afield with her earlier downgrade? Maybe she knew something we didn't? Those pesky analysts!
Looks like QE, next week. Buy high quality banks, if you are smart, but sell on the news OR sell if no news from the Fed meeting, mid-month. A 2% gain on a one week hold is a 100% annualized rate of return.
GLTA.
Walmart has room to run and IMHO it can enjoy a solid Holiday season with one caveat. It's labor management tool, "Scorecard" threatens to so drastically curtail in-store labor that insufficient help is available to ring sales, help customers, perform lay-a-ways or help customers with large items like big-screen televisions and furniture.This is a FACT, today, and will become a crisis, come, Black Friday, if the cubicle-brigade in Bentonville does not have an Epiphany.
Computerized scheduling without human input ignores way too much local info.
J.P. Morgan's Lisa Gill got it right. Narrow network choices stand to benefit CVS. Their CMX PBM can drive customers to a narrower network with plenty of retail options close to most Rx consumers... and do so at lower cost.
The Tri-Care choice to exclude Walgreens to save money tells me two things. First, ESRX blinked and winked to make up with WAG. Second, narrow networks of preferred outlets is not going away as a retail Rx phenomenon and PBM's are starting to wrest the lever of control away from outlet-dominating bullies like Walgreens. Store count, 24/7 hours and drive-throughs are frills that payers will forego to attain Rx cost improvements for their clientele.
It's like the car buyers telling GM that we are not paying more for a Buick branded as an Oldsmobile simply because the showromm is nicer and the nameplate has an upscale cache'. SHOW ME THE MONEY!
August Sales <4.5%, SS Rx's <9.3% factoring 2.5% in 90 day Rx's.
Stunning metrics.
Better hope that the A/B ad-in IS the proverbial "rabbit in a hat." S/P is taking a beating in the pre-market, as I expected from the Tri-Care news and AUG comps.
The Tricare announcement hit me as a total surprise after the earlier, non-descript PR on settling the impasse as issued by both Walgreens and ESRX. This omission seems very misleading to the investment community from both companies.
I wonder what's next, as surprises go?
I think that the most telling aspect to the 9/28 conference call will be IF we can discern whether the accelerated completion of tranch #1 of the Boots deal was done:
to conceal terrible WAG Q4 metrics
Or
to put bad news in consolidation costs and forward projections in hurry up mode to get them off the table.
The latter case is very favorable and could signal a big run upward. Otherwise, well, you know...
Anybody seen the cesspool Yahoo WAG board? Glad to be here with all of you!
Nope. I have heard others advance this theory, as well, but I think it has no substance. I can tell you that Walmart, who is the most frequently mentioned "person of interest" in these postulations is surely not interested, IMHO.
I'm not saying that you are wrong on the shift to wholesale, and I actually predicted WAG would make a move on H.D. Smith or a mid-sized distributor. But their dilemma can be discerned from their failed PBM experience where being a minnow in a pond of huge-jawed Alpha-fish doomed them to abject failure vs. CVS, UNH, ESRX & Medco.
The problem, going forward, is that the HUGE cost of Alliance/Boots which you correctly identify leaves them incapable of acquiring a major player in the wholesale segment. They don't have enough cash to complete A/B and a second major deal like with ABC. WAG could not afford MCK, IMHO.
Consequently, they are STUCK with their drugstore/sushi/flu-shot model for the foreseeable future.
To be honest, I only see the Coventry thing topical if CVS and Walgreens have another impasse at contract/reimbursement renewal time. Maybe they wised up after the ESRX debacle (?).
I do not think FED action on interest rates will come as a surprise, or anytime soon. I can sell all my holdings in two minutes or less. Rather have the diversification than risk a single event calamity like one reit failing to complete required SEC filings and falling off a cliff, as happened recently.
What's wrong with you that you can't grasp the synergies between preparing sushi and prepping for a rectal prostate exam?
I do not think Minute Clinics was divested based on CVS website/profile which I reviewed today.
I got out of CIM when they went late on SEC filings. However, I am very long on ARR, NLY, CYS, MFA, RSO, TWO, HTS, AGNC and a few others.
I especially like ARR, though. Have held for about 4 years with a steady DIV and good S/P growth, to boot.
Got mine, too. Love the monthly div... cuts down on the players trading in and out for a quick capture.
Clinics: Boom or Bust?
Walmart has quit adding locations and closed a bunch down. Little-to-no PR from either Walgreens or CVS on growth or profitability in this previously much-ballyhooed direction. I would have to assume that all these new M&A pursuits and no added investment in clinics kind of tells a tale.
Maybe flu season will bring some daylight(?) to the subject.
Sure got QUIET after all the initial projections and plans.
Thanks for the update.
I don't know Discovery/DSCO.
I quit following biotech a few years ago when I lost a bundle on Trinity Biotech. I'll look into it, though.
Still strong on reits and CQP. Looking at a petro-play as the rhetoric between Iran and Israel escalates.
Walgreens conference call & guidance should be telling. A few exec changes would improve my willingness to jump back in.
Wellpoint CEO shown the door!
Pressure from shareholders prompted the ouster after bad results and poor guidance. Interesting to note that the S/P rose markedly when it was announced the BOD would run the operation while a search was conducted for a replacement.
Walgreens results for Q4 and the year are out on 9/28. Could we see some change?
Hi, robbsbeach. I saw your post and the snarky reply you got.
Specialty meds is where a lot of the moolah is in Rx. As more and more stuff goes generic, chemo and other aggressive treatment drugs may well become the next branded drug battleground... and area for reimbursement intervention by Medicare & Medicaid, whose clients are the dominant users of this expensive stuff.
I'm not sure how PBM's have an edge, here, since many of these medications are not mailorder-friendly... i.e., require refrigeration or special handling.
Anyone have better data or specifics on this?
Hey, I like your new ID! For us in New England, anything "wicked" is really good!
I'm still not sure about the major PBM position, based now largely on the variable outcome of the election and the future or possible demise of Obamacare. However, I certainly will grant you that comping CVS with MHS when they bought Caremark would have made a lot more sense than buying Duane Reade or Alliance/Boots, unless there is some new strategy to be unveiled in the next C/C.
It truly amazes me that Walgreens has gotten a free ride, so far, after committing to spend what, $45 billion on A/B with no announced rationale for investing so much shareholder equity. Their S/P has, so far, just ridden the coattails of the fence-mending with ESRX which, as you note, is like the second inning in the PBM reimbursement home run derby.
Are you still short oil? I suspect that the Iran/Israel confrontation is nearing.
This company has been a dog for 20 years after Bob Lutz of Chrysler pedigree and subsequent GM epitaph ruined it by purchasing GNB and sending the old EX into bankruptcy.
Lead/acid batteries are a dinosaur, no matter how glamorously the Ad Agency dresses up the same old vomit in a sparkly, new trade dress, label and reinvention verbiage.
The only money to be made, here, is by the C-suite leeches.
Investors need not apply.
Anyone have an update on Hurricane Isaac damage?
It did not appear to me that Cameron Parrish where the Sabine Pass is located was extensively affected.
Agree. However these reits have bizarre swings, like with every rights offering, yet that is the lifeblood of growth.
I am also recently noting that the morning price is low and the closing price is higher on most reits, most days. I suspect that this is high frequency trading, and I think it may expose an exploitatable weakness. A lot of these issues are very lightly held in # of shareholders. One I own only has, like, 40 shareholders including my relatively small stake (<20K sh).
I am always looking for an edge.
I am not sure that job growth matters. I think interest rates have a greater impact and they are inflation dependent, not economy dependent.
I think Walgreens WAY overpaid for Duane Reade, probably overpaid for DSCM, WAY overpaid for Alliance/Boots and way undersold their PBM to CHSI. Their debt position certainly is not untenable, but it has certainly deteriorated.
I actually think WAG might have fared better, strategically, by skipping ALL its M&A adventures including clinics, home infusion and all this silly "Wellness" (Doctor-wannabe) crap and just focused on being a cost-optimized local pharmacy. Instead, they are like "The Man of Lamancha" fighting all these windmills... nasty PBM's like CVS & ESRX, nasty big-boxes like Wally & Target... now moving into the global megaplex with no defined strategy that I see.
Maybe some secrets will be revealed in the 9/28 C/C. There is real value in the Walgreens brand. I am just not convinced that the Euro experiment has been fully thought through.
Anyone else note the blogger impact on AGNC?
I have owned AGNC on and off for four years and it strikes me that everytime one of the bloggers like Seeking Alpha post some story predicting a huge decline, the retail investors bolt and the S/P takes a hit? It always seems to cycle back up after around 5 trading sessions. I see similar activity o other mReits I own, as well.
I am actually thinking about adopting a trading strategy based on this phenomenon. I do NOT think the action is movement in and out for a narrow divvy capture.
MY opinion... no growth until August sales are released. The bigger move will be with Septemeber numbers that will begin to scratch the surface of ESRX Rx retention with Walgreens time in the penalty box having expired.
I am liking RAD less since Wag & ESRX kissed and made up. I guess my assessment is that SSS went up because of the ESRX impasse, now how much of that biz will be retained is a questionmark.
Any thoughts? I made a lot of money on RAD when it looked like WAG might acquire them, awhile back.
Anyone care to venture an estimate of how much of the ESRX Rx business that CVS took from Walgreens will retain, now that the two sides have mended fences?
My rough guess will be one third, which would net around a 2% increase in Rx share-of-market... not too shabby for a third party bystander!
Attendence has been poor this year... even Bristol had empty seats. Ratings are down on television. Looks like an overhaul, if you ask me. I think that multi-car teams are part of the problem... have there been any small team "wins" since Trevor Bayne's Daytona win for the Wood Brothers?
I also suspect that the fans booing Michelle Obama at Homestead, last year, drove some less-than-redneck fans away.
Thoughts, anyone?
I think that another factor may be in play in Europe since Walmart's presence is way less than in the U.S. and their price leader in many markets is Carrefour. I believe that only 84 Carrefour stores have pharmacy operations... HABA, yes, Rx, no... giving Walgreens the opportunity to take a page from Walmart's U.S. playbook and commoditize a plethora of staples, both generics and frontend stuff like vitamins, bandaids, etc.
Boots stores are a lot like Walgreens, here, maybe somewhat smaller, but right-sized for neighborhood markets which fits the European norm better than a hypermart like Carrefour. A small box store with purchasing clout and price leadership, locally, could score huge marketshare gains and mint money since deep discounting ala Wallyworld does not exist in Europe the way it predominates, here. The scenario almost replicates what Walgreens did to cannibalize Indies, here, for the last 20 years.
I am getting tempted to buy, but nut until Q4 earnings and the C/C.
Yank
p.s. I think they miss us on the Yahoo board... "CC" is having a fit!
I agree that this is a high risk/high reward proposition. The funding is secure for the first two trains, as are the EPA permits which are the crucial timeline requirements for LNG exporting. Contracts for sale of the LNG are signed and in place. I think that NOW is the time to begin accumulating shares because as 2015 draws near the S/P is likely to skyrocket.
A big additional "if" is the election's outcome. An Obama win will likely catapult LNG into the U.S. Energy policy. A win for Romney... well, their largest campaign donors are the Koch Brothers of oil fame... that outcome is very predictable.
Westport and Clean Energy are good parallel plays, as are bulk liquid tankers.
robbsbeach,
I remain neutral on the Alliance/Boots deal until I learn more of their plans, going forward. I agree that Q4 numbers are likely to be ugly, and probably Q1/Q2 FY13 numbers, as well, for reasons we discussed on the Yahoo board.
I am thinking that a dip closer to $30 around the 9/28 C/C might be a good re-entry point. I would be more excited if Skinner announced a few C-suite changes at that time... something others have predicted. We will see.
I sold my last position @ $33.18 after being disgusted by the lack of progress in resolving the ESRX impasse which drug on forever. I think they did the Boots deal because of lack of progress, then finally settled prior to further loss of the MHS Rx volume.
I am somewhat on the fence as to their future. The C/C should be very interesting.