US drug wholesaler AmerisourceBergen has agreed to buy the Walgreens Boots Alliance distribution company for about $ 6.5 billion as it pushes further into Europe.
The offer for Alliance Healthcare, which covers $ 6.275 billion in cash and 2 million AmerisourceBergen shares, comes three years after a potential deal for Walgreens to acquire the distributor of pharmaceuticals expired.
The two companies already have a strategic partnership, but as part of the deal, Walgreens and AmerisourceBergen have agreed to extend a U.S. distribution agreement by three years until 2029. Alliance Healthcare also remains a distribution partner for Boots, the UK pharmacy group, for a decade.
Walgreens is the largest shareholder in AmerisourceBergen with a stake of nearly 30 percent.
The agreement is intended to expand AmerisourceBergen’s presence in Europe, as Alliance is one of the largest wholesalers on the continent.
Stefano Pessina, CEO of Walgreens Boots Alliance, told the Financial Times that he would use the proceeds from the sale to pay off debt and to finance acquisitions, adding that the company has identified a number of targets.
Steven Collis, CEO of AmerisourceBergen, said he had inherited an “intact and very good business” that would enable the company to pursue European expansion.
It will also enable Walgreens to focus on its pharmacy business, which includes more than 9,000 drugstores in the US.
Mr. Pessina has defended retail stores amid an increase in online shopping and 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 healthcare in any country,” he added.
Despite concerns about a sluggish start, Mr. Pessina said Walgreens would complete the first phase of its U.S. vaccination program five days ahead of time, and vaccinate residents and staff at nursing homes across the country by Jan. 25.
Shares in AmerisourceBergen rose nearly 8 percent to $ 105.43 at noon trading in New York. Walgreens’ stock, which fell 30 percent last year when the pandemic put pressure on its bricks and mortar stores, rose 4 percent to $ 42.89.
At the end of 2019, Walgreens was investigating a $ 70 billion management buyout with the US private equity giant KKR that would remove the retailer. The sale of Alliance Healthcare is likely to spark speculation about a new attempt to privatize the drugstore group.
Mr. Pessina, the chief operating officer who has compiled Walgreens over the years through a series of mergers, could use Walgreens’ smaller business and market valuation to investigate a buyout.
He announced last year that he intends to step down and become executive chairman, but does not give a timeline.
Alliance, which started in 1977 as Alleanza Farmaceutica in Italy, was the company that placed Mr Pessina in the big league. A series of transactions in 1997 resulted in a $ 600 million merger with the United Kingdom-listed UniChem.
Less than a decade later, Alliance UniChem combined with Boots, the stalwart British retail pharmacy, in a deal that created a pan-European pharmacy giant with £ 13 billion in annual sales.
Mr. Pessina partnered with private equity group KKR in 2007 to privatize Alliance Boots, a deal that was praised for its audacity but criticized for its impact on Boots, a paternalistic company with Methodist origins that was forced to pay the costs. reduce to service the £ 9bn debt. adopted to finance the merger.
In 2014, Walgreens paid $ 23 billion for its British rival in a two-part deal that creates a transatlantic consensus.
Walgreens and AmerisourceBergen expect that synergy will have an annual running rate of at least $ 150 million over four years, which will be divided equally between the companies.
The news of the deal comes as Amazon, JPMorgan Chase and Berkshire Hathaway call on their joint venture to create an online pharmacy and change the US healthcare system.