American drug wholesaler AmerisourceBergen has agreed to buy the Walgreens Boots Alliance distribution business for about $ 6.5 billion as it moves to Europe.
The offer by Alliance Healthcare, comprising $ 6.275 billion in cash and 2 million shares of AmerisourceBergen, comes three years after a possible deal for Walgreens to acquire the pharmaceutical distributor failed.
The two companies already have a strategic partnership in place, but as part of the transaction, Walgreens and AmerisourceBergen agreed to extend a U.S. distribution contract for three years until 2029. Alliance Healthcare will also remain a distribution partner for Boots, the drugstore group. from the UK, for a decade.
Walgreens is the largest shareholder in AmerisourceBergen with a stake of almost 30 percent.
The deal was designed to expand AmerisourceBergen’s presence in Europe, as Alliance is one of the continent’s largest wholesalers.
Stefano Pessina, chief executive of the Walgreens Boots Alliance, told the Financial Times that he would use the proceeds from the sale to pay off debts and help finance acquisitions, adding that the company had identified a number of targets.
Steven Collis, chief executive of AmerisourceBergen, said he “inherited a very good and intact business” that would allow the company to continue with European expansion.
This will also allow Walgreens to focus on its pharmacy business, which includes more than 9,000 drugstores in the United States.
Pessina defended retail stores amid an increase in online shopping and pharmacy delivery services. Using the coronavirus vaccine as an example, he said that some things could not be distributed digitally. “Pharmacies will continue to be the backbone of health in any country,” he added.
Despite concerns about a slow start, Pessina said Walgreens would end the first phase of its US vaccination program five days ahead of schedule, vaccinating residents and staff in nursing homes across the country by January 25.
AmerisourceBergen’s shares rose nearly 8% to $ 105.43 on the New York noon trading session. Walgreens shares, which fell 30 percent last year while the pandemic put pressure on its physical stores, also rose 4 percent to $ 42.89.
In late 2019, Walgreens explored a $ 70 billion management buyout with U.S. private equity giant KKR that would have withdrawn the retailer. The Alliance Healthcare sale is expected to rekindle speculation about a new attempt to make the drugstore group private.
Pessina, the deal-hungry boss who set up Walgreens through a series of mergers over the years, could take advantage of Walgreens’ smaller businesses and market valuation to explore a purchase.
He announced last year that he planned to step down and become chief executive, but did not give a deadline.
Alliance, which started in Italy as Alleanza Farmaceutica in 1977, was the company that put Pessina in the big league. A series of deals culminated in a $ 600 million merger with UK-listed UniChem in 1997.
Less than a decade later, Alliance UniChem joined Boots, the robust British pharmaceutical retail chain, in a deal that created a pan-European pharmaceutical giant with £ 13 billion in annual sales.
Pessina joined the private equity group KKR in 2007 to shut down Alliance Boots, a transaction praised for its audacity but criticized for its impact on Boots, a paternalistic company of Methodist origin that was forced to cut costs to pay the £ 9 billion of the debt assumed to finance the merger.
In 2014, Walgreens paid $ 23 billion for its British rival in a two-party deal that created a transatlantic giant.
Walgreens and AmerisourceBergen expect synergies in four years at an annual execution rate of at least $ 150 million, which will be shared equally between the companies.
News of the deal comes when Amazon, JPMorgan Chase and Berkshire Hathaway complete their joint venture to create an online pharmacy and change the health care system in the United States.