Walgreens acquires 45% share of Alliance Boots, creating global-pharmacy-led, health enterprise

Walgreens announced today that it has entered into a strategic transaction with Alliance Boots GmbH, the leading international pharmacy-led health and beauty group, creating a global pharmacy retail and wholesale business with more than 11,000 retail 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, according to a Walgreens press release.

The U.S. and European portfolio of retail and business brands includes Walgreens, Duane Reade, Boots, and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Botanics, and Boots Laboratories, the statement said.

“Walgreens will invest approximately $6.7 billion in cash and stock ($4 billion in cash and 83.4 million shares) in exchange for 45% equity ownership in Alliance Boots,” Walgreens said in its statement. “Walgreens will have the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in approximately three years’ time….The second step of the transaction would be valued at approximately $9.5 billion in cash and stock, plus assumption of Alliance Boots then-outstanding debt.”

The initial investment is expected to be completed by September 1, 2012, after various regulatory approvals, Walgreens said.

“We are looking forward to working with Alliance Boots to leverage our combined strengths and provide an even broader range of innovative, cost-effective products and services to patients and customers across the healthcare landscape,” said Gregory Wasson, president and CEO of Walgreens. “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.”

Stefano Pessina, executive chairman of Alliance Boots, said, “Today’s announcement is testimony to the great track record and accomplishments of the Alliance Healthcare and Boots teams that have delivered strong growth since creation of Alliance Boots six years ago and its subsequent privatization. I strongly believe the transaction offers further significant growth opportunities and marks a very positive milestone for the healthcare industry as a whole.”

Walgreens also announced its fiscal 2012 third quarter earnings of $537 million, which amounted to 10.8% decrease from $603 million in the same quarter last year. The net earnings per diluted share for the quarter decreased by 4.9% to 62 cents per diluted share in the year-ago quarter. This year’s quarter was negatively impacted by 1 cent per diluted share due to costs related to a definitive agreement with Alliance Boots GmbH, which was also announced today.

Net earnings of the first nine months of fiscal 2012 were $1.77 billion versus last year’s $1.92 billion, a 7.7% decrease, Walgreens stated.