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February 17, 2010 2:30 PM

Paul Weiss, Wachtell, Weil Advising on $1.1 Billion Duane Reade Deal

Posted by Brian Baxter

UPDATE: 3:55 p.m. The ninth and tenth paragraphs of this post have been added with information from Paul Weiss's Robert Schumer.

Walgreens announced on Wednesday plans to acquire rival Duane Reade for nearly $1.1 billion in cash, expanding the national drugstore chain's presence in the New York metropolitan area. The deal saw Paul, Weiss, Rifkind, Wharton & Garrison, Wachtell, Lipton, Rosen & Katz, and Weil, Gotshal & Manges score key advisory roles.

Walgreens is the largest drugstore chain in the U.S. with roughly 7,000 stores in 50 states. The acquisition of Duane Reade, named after two streets in downtown Manhattan, will bring an additional 257 stores under the Walgreens umbrella. The deal also means that the good times continue to roll for Wachtell, which advised Deerfield, Ill.-based Walgreens on the transaction.

The firm is serving as M&A counsel to four clients on several deals announced over the last few days and collectively worth about $16.6 billion: Walgreens, Simon Property Group in its $10 billion bid for bankrupt rival General Growth Properties, fertilizer producer Terra Industries on its $4.1 billion sale to Norway's Yara International, and Mexican broadcaster Grupo Televisa on its $1.4 billion acquisition of a wireless unit from mobile carrier NII Holdings.

One Wachtell attorney who's advising both Simon and Walgreens is corporate partner Benjamin Roth. He was one of two lawyers promoted to partner at the 240-lawyer firm last November. (Wachtell posted profits per partner of $4 million in 2008.) We reached out to Roth regarding the firm's M&A hot streak--Wachtell also is advising Lions Gate in an attempt to fend off an acquisition by Carl Icahn--but he declined to comment.

Wachtell has a longstanding relationship with Walgreens, having advised the company on its $760.5 million acquisition of health care firm Option Care in 2007. The Duane Reade deal is Walgreens's largest retail acquisition to date, according to CNNMoney.com.

Also advising Walgreens are Wachtell corporate partner Andrew Brownstein, restructuring and finance partner Eric Rosof, tax partner T. Eiko Stange, and employee benefits counsel Ian Levin. (Rosof is part of the Wachtell team advising Simon on its bid for General Growth.)

Weil antitrust cochair Steven Newborn, antitrust partner Steven Bernstein, and counsel John Sipple, Jr., are handling antitrust and regulatory matters for Walgreens. Weil previously advised Walgreens on its Option Care acquisition, which made the drugstore chain the nation's fourth-largest provider of specialty pharmacy services.

Duane Reade turned to Paul Weiss's Robert Schumer, cochair of the firm's M&A group, and Ariel Deckelbaum, deputy chair of the corporate department, on the deal. The firm has a longstanding relationship with Duane Reade's private equity owner, Stamford, Conn.-based Oak Hill Capital Partners, having advised Oak Hill when it took the drugstore chain private in a $700 million deal in 2004.

Schumer is cautiously optimistic about whether the spate of deals announced the past few days could signal the return of good times for M&A lawyers.

"If you look at what's going on, all of these deals have a strategic element to it," he says. "But I think things are picking up, even though it's episodic. There are still significant issues in the credit markets, and prices still have to adjust in terms of expectations, but you're certainly starting to see more [deals]."

According to CNNMoney.com, Duane Reade has the highest sales per square foot in the retail drugstore industry in the U.S. The acquisition will give Walgreens an edge over its growing national rival CVS Caremark, which was formed out of a $4.7 billion merger in August between CVS and benefits manager Caremark Rx. (CVS also acquired Longs Drug Stores--another Wachtell client--in August 2008 for $2.7 billion.)

Walgreens's offer for Duane Reade includes assumed debt from the target. The transaction is expected to close by August 31.

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