Walgreen Chief Rein Retires After Slowing Sales, Failed Bid

-- Walgreen Co. said Jeffrey A. Rein retired as chairman and chief executive officer after five quarters of slowing sales and a failed bid to take over smaller Longs Drug Stores Corp.

Rein, 56, didn't resign for health or ethical reasons or because of Longs, spokesman Michael Polzin said today in an interview. He declined to comment on whether the retirement was planned. Director Alan G. McNally was named chairman and interim CEO, effective immediately, Walgreen said.

The Deerfield, Illinois-based company has posted profit that trailed analysts' estimates three times in the past five quarters, while the 9.8 percent revenue gain for the year that ended in August was the smallest increase at least a decade. CVS Caremark Corp. managed to keep the support of Longs's board to buy the California-based drugstore chain for $2.7 billion even though Walgreen made a higher offer.

``There's a pattern here that's developed, of disappointment,'' said Matthew Kaufler, a fund manager at Rochester, New York-based Clover Capital Management Inc., with $2.6 billion in assets including CVS shares. ``They're going through a period now where their ability to deliver results is in doubt, when for decades it was never in doubt.''

Walgreen fell $2.06, or 8.1 percent, to $23.22 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 39 percent this year, the same decrease as the Standard & Poor's 500 Index.

Acting Chief

McNally, 62, has been a member of the board since 1999, Walgreen said in a statement. He previously served as CEO of Harris Bankcorp Inc.

Rein joined Walgreen in 1990, served as CEO since July 2006 and was named chairman in July 2007. The company hasn't set a timeframe for replacing him, Polzin said.

Walgreen said Oct. 8 that it was withdrawing its $2.8 billion proposal to acquire Longs after earlier threatening to take the offer directly to shareholders. The drugstore chain also pursued Longs earlier this year, only to see CVS reach an agreement.

``I have a hard time believing that it's not related,'' said David Heller, president of Advisory Research Inc., which holds Walgreen and Longs shares. ``We are disappointed that Walgreen did not stay more consistent in its desire to buy the company.''

Advisory Research, which had sought a higher offer, said today it would tender its shares in favor of the CVS proposal. Pershing Square Capital Management LP's Bill Ackman, who had also protested the CVS bid as too low, said he was unable to find anyone beside Walgreen who wanted to bid for Longs.