Walgreen CEO to leave after Alliance Boots deal in reversal of plan
Walgreen (WAG) CEO Greg Wasson will leave the drugstore chain after its proposed merger with European peer Alliance Boots closes, in a complete reversal of the company’s earlier plan in August that called for Wasson to lead the combined company.
Walgreen’s chairman, former McDonald’s (MCD) CEO Jim Skinner, will serve as executive chairman of Walgreens Boots Alliance, while Stefano Pessina, executive chairman of Alliance Boots, will be its acting CEO while the board looks for a successor for Wasson. Shareholders will vote on the deal Dec. 29.
A Walgreen spokesman declined to comment on the reversal in plans beyond the press release, only echoing Wasson’s statement that now was the right time to pass on leadership responsibilities.
“When I became CEO six years ago, I had three goals—to transform the front end of Walgreens drugstores, to advance the role that community pharmacy plays in health care and to find the right partner to take Walgreens global,” Wasson said. “With the creation of Walgreens Boots Alliance, it is now time for new leadership.”
Wasson has repeatedly found himself in the center of controversy recently. He came under heavy criticism over the summer when he admitted he was considering structuring the Alliance Boots deal as an “inversion,” which would lower its taxes by changing its domicile to Switzerland. Walgreen ultimately decided against an inversion amid questions about Walgreen’s patriotism.
Wasson and Walgreen were also hit in October with a lawsuit by former chief financial officer Wade Miquelon, Wasson’s one-time right hand man, who claimed Wasson and a Walgreen director defamed him in meetings with large shareholders. That was part of a saga that was chronicled in a Wall Street Journal story alleging a bad forecast of generic drug prices led to an unexpected reduction in the company’s profit target. Walgreen responded in a court motion that Miquelon was responsible for the disappointing forecast.
Before that, in 2011, Wasson picked a fight with pharmacy benefits manager Express Scripts Holdings (ESRX) over contract terms that proved costly and led to Walgreen not filling prescriptions for Express Scripts members for nearly 9 months, costing Walgreen billions in sales as millions of customers went elsewhere to CVS (CVS) or Rite Aid (RAD) to fill prescriptions. It took the company a long time to recover, as many customers never returned. More recently the company has faced chronic shopper traffic problems.
He also had enormous success on many fronts. Wasson, who started at Walgreen in 1980 as a pharmacy intern and made his way to the corner office in 2009, is credited with landing the Alliance Boots deal, aimed at giving Walgreen a foothold in international retail when the U.S. drugstore landscape is getting saturated. He also oversaw Walgreen’s acquisition of the New York-based Duane Reade drugstore chain in 2010. On his watch, Walgreen has modernized how its stores look and their food assortment. Sales rose from $63 billion to $76 billion.
Walgreen shareholders will vote on Dec. 29 on whether Walgreen should buy the 55% of Alliance Boots it doesn’t already own (it took a 45% stake in 2012, with the option to buy the rest within the following three years.) The company has said it expects to close the controversial deal in the first quarter of 2015.
CtW Investment, a representative of union pension funds with a 0.3% stake (2.5 million shares) in Walgreen, is adamantly opposed to the Alliance Boots deal and has sought to derail it. Dieter Waizenegger, Executive Director of the CtW Investment Group, called for the postponement of the shareholder vote, saying shareholders have “no clear sense of who will be running” the merged company after Wasson’s news.