$6.5 Billion: Walgreens And AmerisourceBergen Deal
Walgreens sells majority stake of its Alliance Healthcare business unit to AmerisourceBergen
Walgreens Boots Alliance (NASDAQ: WBA) is selling a majority stake of Alliance Healthcare to AmerisourceBergen for $6.275 billion in cash and two million shares of AmerisourceBergen common stock.
The deal benefits Walgreens and AmerisourceBergen in several ways. Walgreens streamlines its business model to focus its attention on retail, mail order and specialty pharmacy plus drive the expansion of its in-store primary care clinic initiative. The company gains a substantial amount of cash plus adds to its already substantial holdings of AmerisourceBergen stock.
By adding Alliance Healthcare to its organization, AmerisourceBergen fortifies its competitive position against Cardinal, Henry Schein, McKesson and Medline.
Alliance Healthcare is part of the original Alliance Boots organization acquired by Walgreen Co.
Alliance Healthcare is a major healthcare supply chain company based in Brooklands Weybridge, UK. It is a legacy enterprise of Alliance Boots, Inc. with origins dating back to 1896 in The Netherlands. Over a 2-year process, Walgreens acquired a 45 percent stake in Switzerland-based Alliance Boots for $6.7 billion in 2012 and in 2014 bought the remaining 55 percent for $15.3 billion.
The combined company became known as Walgreens Boots Alliance and transitioned from NYSE: WAG to NASDAQ: WBA. Its global business operations include over 20,000 drugstores in 11 countries.
Alliance Healthcare is a diversified organization
The Alliance Healthcare division of WBA operates primarily in the UK. Its services are comprised of :
- Clinical trial support
- Healthcare data analytics
- Pharmaceutical, medical device, diagnostics, supplies wholesaling
- Pharmacy services
- Product launch and product recall support
- Supply chain logistics
Its clients include:
- Homecare agencies
- Physician offices
In 2019 Alliance Healthcare generated about $19 billion in revenue.
AmerisourceBergen is a multifaceted worldwide supply chain leader
The acquisition of Alliance Health by AmerisourceBergen enlarges their already enormous global healthcare wholesale and distribution business. The deal gives them a solid position in the UK market and augments their MWI Animal Health U.K. veterinarian unit.
Founded in 2001 by the merger of Bergen Brunswig and AmeriSource, AmerisourceBergen is one of the largest contenders in the healthcare wholesaler business sector.
Its clients encompass:
- Brand and generic pharmaceutical manufacturers
- Hospital and health systems
- Medical device and diagnostics manufacturers
- Medical groups, physician practices
- Consumer and patient care supplies
- Retail, mail order and specialty pharmacies
- Veterinarian and animal health enterprises
Based in Chesterbrook, Pennsylvania (a community located west of Philadelphia) AmerisourceBergen produced over $189 billion in 2019 revenue. Walgreens Boots Alliance is the largest shareholder of AmerisourceBergen stock. They own roughly 30% of the company and with the closing of the Alliance Health deal, it will hold another 2 million shares in AmerisourceBergen.
Walgreens Boots Alliance continues its corporate transformation
Headquartered in the Chicago suburb of Deerfield, Walgreens has orchestrated a significant remake beginning in 2019 of its internal operations while augmenting its commercial business initiatives through an array of strategic partnerships and executive leadership hirings.
While COVID-19 has not been kind to its retail business, the company’s stores are still enviable assets that will see a strong rebound in revenue when the pandemic subsides. The company is a major partner with the U.S. government to administer COVID-19 vaccinations to long term care residents, their caregivers and the general public.
In 2019 Walgreens entered into partnership agreements with Kroger, McKesson, Microsoft and Prime Therapeutics. It was also exploring opportunities to take itself off the market through a private equity deal or perhaps an outright sale to another healthcare retailer or online enterprise like Amazon.
They kicked off 2020 by hiring Dr. Kevin Ban as their new chief medical officer followed by signing a 10-year, $1.5 billion IT outsourcing deal with TATA Consultancy. In response to the pandemic, Walgreens signed a home delivery service contract with DoorDash and PostMates in the Spring of 2020.
During the Summer of 2020, Walgreens entered into a $1 billion deal with VillageMD to build between 500–700 in-store primary clinics in Walgreens stores and signed Rite Aid CEO John Standley as executive vice president, Walgreens Boots Alliance, Inc. and president, Walgreens.
Walgreens has big plans for 2021
Walgreens has always been an innovative leader in pharmacy, consumer healthcare and technology. Founded in 1901, it generated over $136 billion in annual sales during 2019 and its stock has paid a dividend for over 80 years.
Reportedly Walgreens plans to use the proceeds of the deal “to create the drugstore of the future”. Whether it remains a public company, goes private or is acquired, Walgreens is a company held in high esteem by consumers, patients, competitors and investors.
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