S&P: Walgreen on watch

Standard & Poor's said it 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, Walgreen will also pay the $115 million termination fee related to the CVS transaction, the agency said.

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, S&P said.

Assuming that the acquisition is largely debt funded, the agency said it expects debt leverage to increase to the mid-3x range from 2.9x for the 12 months ended May.

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