The Joplin Globe, Joplin, MO

Business

June 19, 2012

Walgreen buys stake in European drug store chain for $6.7 billion

CHICAGO — Walgreen Co. said Tuesday that it has agreed to buy a 45 percent stake in Alliance Boots, a European retail pharmacy chain, for $6.7 billion, in a cash and stock transaction that will create the world’s largest drugstore chain with more than 11,000 stores in 12 countries.

The deal, which represents the Deerfield, Ill.-based company’s first international expansion, is expected to close Sept. 1, and includes an option for Walgreen to take full control of Alliance Boots three years after the deal closes.

Walgreen will pay the European pharmacy and beauty retailer $4 billion in cash and $2.7 billion in company stock.

Walgreen CEO Greg Wasson said in a morning conference call that the company intends to buy the remainder of Alliance Boots within three years. The total takeover is expected to cost $9.5 billion in a combination of cash and stock.

He said the deal will create “immediate synergies in the near term” that will allow Walgreen to achieve annual cost savings of up to $150 million in the first year after the deal closes, and as much as $1 billion by the end of 2016.

Under terms of the transaction, Alliance Boots’ executive chairman, Stefano Pessina, and Dominic Murphy of the investment firm Kohlberg Kravis Roberts will join the Walgreen board. Wasson and a number of other Walgreen executives will become board members of Alliance Boots.

Wasson declined to say what effect the deal may have on Walgreen’s continuing spat with the pharmacy benefits manager Express Scripts Inc. When the two parted ways Jan. 1 after they were unable to come to terms on a new contract, Walgreen walked away from more than $5 billion in annual revenue. Walgreen has remained steadfast in the decision.

Walgreen also expects the agreement with Alliance Boots to accelerate its domestic strategy of transforming its stores into so-called “health and daily living destinations,” with expanded health care services, fresh food options and enhanced beauty departments.

Further, Wasson said, the deal will allow the two companies to assemble an international expansion platform and expand on Alliance Boots’ strategy to move into emerging countries by taking ownership positions in other companies.

 

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