Walgreen Takes Stake in Alliance Boots for $6.7B
Walgreen Co. is buying a 45% stake in European health and beauty group, Alliance Boots for $6.7 million. It will pay $4 billion in cash and 83.4 billion shares for the stake in the company, which was formed by the 2006 merger of Boots, and pan-European wholesale and retail pharmacist, Alliance UniChem.
Walgreen noted on Tuesday it had an option to buy the rest of Alliance Boots in three years, making a combined business with more than 11,000 stores in 12 countries and more than 370 distribution centers delivering to more than 170,000 pharmacies, doctors, health centers and hospitals in 21 countries.
"Together we will be ideally positioned to expand our customer offerings in our existing markets and become the health and wellbeing partner of choice in emerging markets," said Gregory Wasson, president and CEO for Walgreen.
European drug prices are under pressure as cash-strapped governments across the euro zone make deep budge cuts, but that is increasing the incentives to boost volumes and achieve economies of scale.
Walgreen's U.S. retail business has suffered since January, when it stopped filling prescriptions for members of Express Scripts Holding Co, which manages prescription drug benefits for employers and other clients. The two companies had failed to agree on terms to renew the contract.
Walgreen said it would finance the cash element of the deal from existing and net borrowings. If it decides in three years time to exercise its takeover option it will pay $4.9 billion in cash and issue 144.3 million shares for the remaining equity. It will also assume Alliance Boots' outstanding debt.
For related content: