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NEW YORK - J.C. Penney Co. today announced it would sell its Eckerd drug store chain to two competitors for more than $4.5 billion, ending a lengthy auction and leaving the department store retailer free to concentrate on its core operations, Reuters reports.
According to the transaction, Canadian drug store chain Jean Coutu Group will acquire about 1,540 Eckerd stores, mostly in Mid-Atlantic and Northeast states, for about $2.375 billion, Penney said.
CVS Corp., the No. 2 U.S. drug store chain in the United States, will purchase the remaining 1,260 stores, mostly in the South and Midwest, as well as Eckerd's mail-order Pharmacy Benefit Management unit, for about $2.15 billion.
Penney expects to earn about $3.5 billion in cash proceeds following various adjustments, taxes, and deal costs. Its board will review what to do with the money, including stock and debt buybacks.
The deal marks the end of a six-month auction that started last October when Plano-Texas-based Penney hired Credit Suisse First Boston to unload the troubled Eckerd chain.
Although the 2,800-store Eckerd unit has accounted for nearly half of Penney's sales during the current fiscal year, the franchise was beset in recent quarters by woes related to pricing pressure from bigger competitors, and difficulties managing its inventories.
According to analysts, selling Eckerd would help Penney pay off its debt and add new money to the company's core department store operation. It also would relieve the retailer of a big problem: Despite a three-year turnaround effort, Eckerd's operating profit plunged almost 30 percent during the first nine months of fiscal 2003.