Walgreen Buys 45 Percent Stake in Alliance Boots, Creating World’s Biggest Buyer of Health Products

The move will give both companies reach into new markets. The news saw Walgreen shares drop 6 percent as some investors were concerned by the decision to expand in Europe.

20 Jun 2012 --- U.S. drugstore chain Walgreen Co has announced it is taking a 45 percent stake in European health and beauty group Alliance Boots Holdings Ltd for $6.7 billion in cash and stock; in effect creating the world’s biggest purchaser of health products.

The move will give both companies reach into new markets. The news saw Walgreen shares drop 6 percent as some investors were concerned by the decision to expand in Europe.

The deal, which has been negotiated over 18 months, marks Walgreen's first move beyond the USA. The company is betting that the move will give it increased access to international markets where Boots is growing in presence, such as China. Similarly the alliance gives Boots a long sought entry into the US.

A combination would create a 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.

If Walgreen decides to exercise its takeover option in three years, 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, which was just over 7 billion pounds at its 2011-12 year-end.

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. This 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.”

Stefano Pessina, Executive Chairman of Alliance Boots, commented, “This strategic transaction represents a further vital step in achieving our vision of becoming a global healthcare leader. We believe that it will bring clear benefits to all stakeholders, creating significant and sustainable industrial value through synergies and the deployment of our joint expertise.

“The fit is natural; Walgreens consumer profile in the U.S. is similar to Boots in the UK in many ways: a trusted and much-loved pharmacy brand with a strong heritage. Our pharmaceutical wholesale businesses will provide their logistics know-how to Walgreens and are well placed to be one of the growth engines of the new enterprise.”