Walgreens Boots Alliance is selling off the majority of its wholesale pharmacy company, Alliance Healthcare, to AmerisourceBergen in a deal worth approximately $6.5 billion, the two companies have announced.
Walgreens will receive $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock.
In addition to the transaction, the companies are extending their U.S. distribution agreement until 2029, and Alliance Healthcare UK will remain the distribution partner of Boots until 2031.
The deal is expected to close by the end of AmerisourceBergen's fiscal year 2021 and is subject to the satisfaction of regulatory approvals.
WHAT'S THE IMPACT?
As one of the largest pharmaceutical wholesalers in Europe, Alliance Healthcare will grow AmerisourceBergen's wholesale, distribution and related solutions capabilities, ultimately expanding the breadth and depth of its global manufacturer services, AmerisourceBergen president and CEO Steven Collis said in the announcement.
The sale will allow Walgreens to focus on its retail pharmacy and healthcare businesses, which in recent months has included a foray into primary care. The retailer has a deal with VillageMD to open 500 to 700 clinics in Walgreens locations over the next five years.
THE LARGER TREND
By freeing itself up to put more energy into its other businesses, Walgreens will be better equipped to compete with the likes of CVS and Walmart, both of which have also begun moving in to the primary care space.
By the end of the year, CVS hopes to have opened another 1,500 HealthHubs.
Walmart has been working on expanding its care centers and will open an additional 22 facilities by the end of 2021.
For its part, Walgreens recently announced plans to open 40 new full-service primary care clinics by the end of this summer.
Walgreens announced its 2021 first-quarter results on Thursday, as well. It brought in $36.3 billion in sales, an increase of 5.7% year-over-over, and had an operating loss of $440 million due to a $1.5 billion charge from the company's equity earnings in AmerisourceBergen.
Overall, the first quarter results yielded low single-digit growth in adjusted earnings per share at constant currency rates and "exceeded expectations, reflecting strength in Boots UK and Boots Opticians," according to the announcement.
ON THE RECORD
"This strategic agreement with AmerisourceBergen, which we consider to be the world's leading pharmaceutical wholesaler, is a very positive development for the two companies. This deal will enable significant value creation for both companies and will generate new synergies in addition to those already captured. It is a logical step following the success of our long-term strategic relationship with AmerisourceBergen which has been a strong and trusted partner since 2013," said Stefano Pessina, executive vice chairman and CEO of Walgreens Boots Alliance. "The transaction will fuel higher future investments to grow and transform our core retail pharmacy and healthcare businesses, and is EPS accretive long-term for Walgreens Boots Alliance."
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