Close Ties
For Walgreens, shedding the Alliance units will hone its focus on the pharmacy business. While rival CVS Health Corp. has added health-insurance plans, pharmacy-benefit management and other health services, Walgreens has been looking to shore up its stores, betting that they will remain fixtures for consumers even as online threats encroach on both its retail and pharmacy operations.
At the same time, gaining control of the Alliance units will help AmerisourceBergen expand its global reach. The terms of the deal include $6.275 billion in cash and 2 million shares of AmerisourceBergen’s common stock, the companies said in a statement. In addition, the firms extended existing distribution agreements in the U.S. and the U.K. by several years.
Walgreens and AmerisourceBergen have longstanding close ties—the drugstore giant is AmerisourceBergen’s biggest shareholder, with a stake of 30%—and the companies have been talking for years about the potential transaction. AmerisourceBergen has a strong financial position to make it happen, Chief Executive Officer Steven Collis said on a conference call.
“We are pursuing this transaction from a position of strength,” said Collis. “This is something that has been contemplated for a very long time,”
AmerisourceBergen is among drug distributors sued by states and local governments claiming the companies fueled the U.S. opioid epidemic by flooding communities with the highly addictive painkillers. In November, the company said it would set aside a $6.6 billion charge to cover the costs of a settlement proposal.
In a separate statement Wednesday, AmerisourceBergen boosted its earnings forecast for the fiscal 2021 year that ends in September. The Chesterbrook, Pennsylvania-based company expects earnings per share of $8.25 to $8.50, excluding some items, up 5 cents from its previous range.
Walgreens is expected to report its latest quarterly results on Thursday. Its Alliance Healthcare businesses had combined revenue of about $19 billion in 2020, and adjusted earnings before interest, tax, depreciation and amortization of $540 million.
This article was provided by Bloomberg News.