Walgreen Co. 'A+' Corporate Credit Rating On Watch Neg On Proposed Longs Drug Acquisition

NEW YORK, NY--Standard & Poor's Ratings Services has placed its ratings on Walgreen Co., including the 'A+' corporate credit and 'A-1' short term ratings, on CreditWatch with negative implications following Walgreen's proposal to acquire Longs Drug Stores Corp. in a transaction valued at about $3 billion, including the assumption of debt.

In addition, Deerfield, Ill.-based Walgreen will also pay the $115 million termination fee related to the CVS transaction.

"The CreditWatch placement reflects Walgreen's more aggressive financial policy, the expected increased in debt leverage to fund the acquisition, and its limited track record in integrating large acquisitions," explained Standard & Poor's credit analyst Ana Lai.

Assuming that the acquisition is largely debt funded, we expect debt leverage to increase to the mid-3x range from 2.9x for the 12 months ended May 2008.

"If completed, we could lower the corporate credit rating by at least one notch," added Ms. Lai.

Media Contact: David Wargin, New York (1) 212-438-1579, david_wargin@standardandpoors.com

Analyst Contact:
Ana Lai, CFA, New York (1) 212-438-7895