Walgreen Co. (NYSE: WAG)(NASDAQ: WAG) today announced a definitive agreement with Catalyst Health Solutions, Inc. (NASDAQ: CHSI) under which Catalyst will acquire Walgreens pharmacy benefit management business, Walgreens Health Initiatives, Inc. (WHI), in a cash transaction for $525 million, subject to certain adjustments. The transaction is structured as an acquisition of all of the capital stock of WHI.

The sale accelerates Walgreens strategy of leveraging the best community store network in America by providing and expanding pharmacy, health and wellness solutions to all of its patients and payers including employers, health plans, health systems, pharmacy benefit managers and government agencies. For Catalyst, the acquisition offers the opportunity to grow its business and expand its expertise in providing traditional pharmacy benefit management services.

“With nearly 7,700 drugstores as our center of gravity, we are focused more than ever on delivering convenient, affordable, high quality pharmacy, health and wellness solutions, and on enhancing our full scope of services to become America’s first choice for health and daily living needs,” said Walgreens President and CEO Greg Wasson.

Completion of the transaction is subject to customary conditions, including receipt of regulatory approvals and clearances. The transaction is expected to close by the end of June 2011. Under a transition services agreement, Walgreens will provide certain services to Catalyst after closing to facilitate a smooth transition for WHI’s existing customers and patients. Walgreens expects these costs to be approximately $40 million dollars. Walgreens expects to record a gain on the sale of WHI upon closing which the company expects will offset any one-time or transition costs associated with the transaction in the current fiscal year. The company anticipates that the transaction will be neutral to earnings per share in fiscal 2012.

By acquiring WHI, Catalyst’s PBM membership will increase to more than 18 million members. Walgreens has selected Catalyst to provide PBM and related services for Walgreens employee and retiree prescription drug plans, as well as other Walgreens programs such as the Walgreens Prescription Savings Club.

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