The Story Of Duane Reade
Andrew Ross Sorkin has a wonderful piece on the story of Duane Read, the Manhattan based drug store chain with 257 stores in the New York Area that was acquired by Walgreen’s (WGN) last Wednesday, in today’s New York Times: “Duane Reade and Its Road to Health”, Andrew Ross Sorkin, The New York Times, February 23, B1.
Duane Reade was founded by two brothers in 1960 who opened the first store on the corners of Duane and Reade streets. After building stores all around the city, the brothers looked to cash out in 1992 and sold it to Bain Capital. Bain sold a majority stake to Donaldson, Lufkin & Jenrette in 1997 which turned around and took Duane public in 1998. (For a hilarious account of working at DLJ and Wall Street in general during the 1990s, check out Monkey Business: Swinging Through The Wall Street Jungle (2001) by John Rolfe and Peter Troob, a book which The Industry Standard called “the funniest read since Liar’s Poker”).
In 2004, Andrew Nathanson, the banker who took Duane public with DLJ in 1998, now at private equity firm Oak Hill Partners, teamied up with CEO Anthony Cuti to take Duane Reade private using $500 million in debt. Mr. Cuti may have inflated the company’s income and has been charged with securities fraud. In 2006, Nathanson retired from Oak Hill and he died in a surfing accident last summer.
At that time, apparently Oak Hill installed new management which has done an excellent job of cleaning up and streamlining Duane Reade’s stores leading to an improvement in business. That caught the attention of Walgreen’s which is buying the chain for $1.1 billion, including the assumption of $480 million in debt, from Oak Hill.
18 months ago, those of us in California were treated to a similar consolidation in the drugstore space when CVS acquired Long’s 521 stores for $2.9 billion, including the assumption of debt. Since that time, two local Long’s, one by my house and the other by my office, have been rebranded as CVS. CVS has a great rewards card that rebates 2% of the total purchase price and a lot of great coupons such as a $4 off any purcahse of $20 or more that I’ve gotten the last 6 or 7 times I’ve been in.
However, there is a price in shopping in such a large chain. On Sunday night I went into the CVS by my office and bought a Tropicana Ruby Red Grapefruit juice. When I got back to my office and took a sip, it tasted a little funny. I noticed that some sediment had settled at the bottom. The expiration date was February 22 – the very next day.