Deerfield, Illinois based Walgreen, the largest drug store chain in the U.S., and Alliance Boots GmbH, the leading international pharmacy-led health and beauty group, today announce that they have entered into a strategic transaction designed to bring together the strengths and expertise of both companies to create the first global pharmacy-led, health and well being enterprise.
The addition of Boots Alliance Private Brands to the Walgreen portfolio of Private Brands is significant, the credibility and expertise embodied in No7, Botanics and Boots Laboratories could well change the beauty game in the US drug channel. Combined with the Private Brands and branding expertise they obtained from the acquisition of Duane Reade and the new or repositioned brands that have launched in the last year Walgreens is well positioned to manage a true portfolio of brand assets
This transaction will bring together two companies with iconic brands, complementary geographic footprints, shared values and a heritage of healthcare services, through pharmaceutical wholesaling and community pharmacy care, dating back over 100 years. Walgreens and Alliance Boots are the largest retail pharmacy, destinations in the U.S. and Europe, respectively, and together they would be:
- the global leader in pharmacy-led, health and wellbeing retail with over 11,000 stores in 12 countries
- the largest global pharmaceutical wholesale and distribution network with over 370 distribution centers delivering to more than 170,000* pharmacies, doctors, health centers and hospitals in 21 countries
- the world’s largest purchaser of prescription drugs and many other health and wellbeing products
Together Walgreens and Alliance Boots would have:
- unmatched supply chain and procurement expertise, offering customers innovative solutions and optimal efficiencies
- an unparalleled portfolio of retail and business brands (Walgreens, Duane Reade, Boots and Alliance Healthcare), as well as increasingly global health and beauty product brands (No7, Botanics and Boots Laboratories)
- diversified and robust profit pools across the U.S., Europe and key emerging markets
- a unique platform for growth in developed and emerging markets
Walgreens will invest approximately $6.7 billion in cash and stock (comprised of $4.0 billion in cash and 83.4 million shares) in exchange for a 45% equity ownership stake in Alliance Boots. Walgreens will have the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in approximately three years’ time. At the current Walgreens share price and at a $1.55=£1 exchange rate, the second step of the transaction would be valued at approximately $9.5 billion in cash and stock, plus the assumption of Alliance Boots then-outstanding debt. Completion of the initial investment, which is subject to various regulatory approvals, is expected to take place by September 1, 2012.
The Boards of Directors of Walgreens and Alliance Boots have unanimously approved the transaction. Upon the completion of Walgreens initial investment in Alliance Boots, Gregory Wasson, President and Chief Executive Officer of Walgreens, Wade Miquelon, Executive Vice President and Chief Financial Officer, Thomas Sabatino, Executive Vice President and General Counsel, and Robert Zimmerman, Senior Vice President and Chief Strategy Officer, will join the Alliance Boots Board of Directors. In addition, Stefano Pessina, Executive Chairman of Alliance Boots, and Dominic Murphy, Director and Member of KKR & Co. L.P., will join the Walgreens Board of Directors. Alliance Santé Participations S.A., of which Stefano Pessina is a director and whose ultimate ownership is a family trust, will hold a significant stake in Walgreens, which it intends to hold for the long term. KKR, through its funds, will also be an important shareholder of Walgreens.
The transaction is expected to be accretive to Walgreens net earnings per diluted share in the first year following completion of the initial step of the transaction, by approximately $0.23 to $0.27, excluding one-time transaction costs. Walgreens expects combined synergies across both companies to be between $100 million and $150 million in the first year and $1 billion by the end of 2016. The most significant short-term and long-term opportunities are:
- procurement synergies, including prescription drug, OTC, front-of-store purchasing and indirect spend; and
- revenue synergies, as a result of introducing Alliance Boots product brands to Walgreens and Duane Reade stores and sharing of best practices, particularly in pharmacy operations, health and wellness services and logistics.
The transaction has been structured to allow synergies to be realized by the respective management teams working closely together on key projects, while progressing to full integration in approximately three years’ time. Walgreens and Alliance Boots believe that this transaction structure maximizes the potential for value creation, while minimizing the initial business disruption and allowing time for thoughtful integration planning.
Gregory Wasson, President and CEO of Walgreens, said, “At Walgreens, our mission is to be America’s first choice for health and daily living – helping our customers to live well, stay well and get well. Today’s announcement represents an exciting opportunity to accelerate our five core strategies and advance that mission – in the U.S. and now internationally. We are bringing together the strengths and expertise of each company to create a worldwide healthcare platform for the future that can provide innovative ways to address global health and wellness challenges.
Source: Prêt a Marque
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