It's easy to blame the
sudden retirement of Walgreen Co. chief executive Jeffrey Rein on the company's
failed bid to acquire Longs Drug Store Corp. Rein's departure was announced just two days after Walgreen dropped its $2.8 billion offer for Longs, allowing rival CVS Caremark Corp. to buy the chain. But pinning his retirement solely on that deal would mask a more complicated story, one that underscores the risks of introducing an aggressive external growth strategy into a conservative company that had achieved decades of success through organic growth.
When Jeffrey Rein took over as CEO of Walgreen in 2006, he set about implementing an ambitious agenda that included opening care clinics inside drugstores and buying the company's way into the home infusion pharmacy sector. Both initiatives were built on rapid-fire acquisitions. Over the past 18 months, Walgreen has purchased in-store clinic operators Take Care Health Systems, I-trax Inc. and Whole Health Management, and home infusion services providers
Option Care Inc. and Express Script Inc.'s
CuraScript Infusion Pharmacy division. In addition, in July, Rein announced the company was
scaling back its store expansion to free up cash for acquisitions.
The strategy was also being executed at a
time of transition for the company's deal team. Walgreen's longtime strategy chief John Gleeson retired in February, after 45 years with the company. VP of corp dev Robert Zimmerman, also a Walgreen veteran, stepped in to replace him. At the same time, VP of store operations Howard Atlas took on the new role of VP of integration for the health and wellness division.
It was a phenomenal amount of change for Walgreen shareholders, who for years had seen the chain succeed through a methodical expansion strategy. It certainly didn't help that the company experienced its first quarterly profit decline in 10 years under Reins and failed to meet Wall Street expectations in the quarter that ended in September.
Longtime board member Allan McNally will become acting CEO, while a board committee searches for a permanent replacement. It's likely whoever takes over full time for Reins will inherit not only a company in flux, but a rattled group of shareholders.
- Suzanne Stevens
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