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Walgreens completes first step of Alliance Boots deal
August 2nd, 2012
DEERFIELD, Ill. – Walgreen Co. has finalized its initial investment in Alliance Boots, under which the U.S. drug chain is buying a 45% equity stake in the global pharmacy and health and beauty aids retailer for $6.7 billion in cash and stock.
Completion of the first step of the two-phase agreement, announced in June, came about a month earlier than the projected Sept. 1 closing date.
Walgreens said Thursday that its initial investment, which has received all required regulatory approvals, includes $4 billion in cash and 83.4 million shares of its common stock for the minority equity stake in Alliance Boots. Under the agreement, Walgreens has the option to acquire the remaining 55% of Alliance Boots in about three years for $9.5 billion in cash and stock.
With the first part of the transaction done, Alliance Santé Participations S.A. — of which Alliance Boots executive chairman Stefano Pessina is a director — has become the largest shareholder of Walgreens. Pessina and Dominic Murphy, director and member of the investment firm Kohlberg, Kravis Roberts & Co. (KKR), a large stakeholder in Alliance Boots, also are now on the Walgreens board of directors.
Meanwhile, Walgreens president and chief executive officer Gregory Wasson, executive vice president and chief financial officer Wade Miquelon, executive vice president and general counsel Thomas Sabatino and senior vice president and chief strategy officer Robert Zimmerman have joined the Alliance Boots board.
Walgreens has a six-month period beginning two-and-a-half years after the closing of the initial investment to decide whether to proceed with the purchase the remaining 55% equity interest in Alliance Boots. In annoucing the deal, the companies said that if Walgreens doesn't exercise that option, under certain circumstances, its ownership of Alliance Boots will decrease from 45% to 42%, in exchange for nominal consideration to Walgreens.
The two companies represent the largest retail pharmacy, health and daily living destinations in the United States and Europe and combined would be the world's biggest purchaser of prescription drugs and a host of other health-related products. Together, Walgreens and Alliance Boots would operate more than 11,000 stores in 12 countries and have the largest global pharmaceutical wholesale and distribution network.