- Walgreens has completed the sale of its Alliance Healthcare businesses to drug wholesaler AmerisourceBergen for $6.5 billion, the retail behemoth announced Wednesday.
- Alliance Healthcare is one of the largest pharmaceutical wholesalers in Europe, so the deal, completed roughly five months after being announced, will significantly bolster AmerisourceBergen's global distribution business.
- Walgreens plans to use the infusion of capital to reduce debt and accelerate the growth of its retail pharmacy and health businesses, including its network of in-store primary care clinics in partnership with medical group VillageMD.
Unlike more diversified rivals like CVS Health and Walmart, Walgreens' main focus is its drugstores, even as the Deerfield, Illinois-based company increasingly looks to expand its health services beyond core retail pharmacy.
The newly closed deal, consisting of about $6.28 billion in cash and 2 million shares of AmerisourceBergen stock, will help Walgreens invest in those strategic opportunities, CEO Rosalind Brewer said in a statement, while allowing the pharmacy operator to pare down debt.
Walgreens already used a portion of the funds to repay the outstanding amount owed on a $3.8 billion loan that funded a bond tender completed in April, eliminating $3.3 billion in debt from Walgreens' balance sheet.
Walgreens, the second-largest pharmacy store chain in the U.S. after CVS with about 9,000 stores, will use the remaining cash to build out its new offerings in healthcare, including its mammoth investment in VillageMD, the company said.
Last summer, Walgreens announced it would invest up to $1 billion in the Chicago-based medical network — including $250 million immediately — to open up primary care clinics at its pharmacies throughout the country, and take up to a 30% stake in VillageMD. Walgreens has said it plans to open 40 of the on-site primary care clinics by the third quarter of this year, with the goal of eventually expanding the network to 700 facilities.
Retail clinics have seen mounting interest from chains like Walgreens, CVS and Walmart, as they can generate additional script-writing and drive front-of-store sales for their owners.
The Alliance divestiture will also be used to build on Walgreens' acquisition of a majority stake in iA, a provider of electronic pharmacy automation tools, the company said. Walgreens announced it would take a majority stake in the Johnson City, New York-based iA in January, noting the COVID-19 pandemic had accelerated consumer demand for easy access to pharmacists and that iA's software allowed pharmacy operators to streamline the brunt of medication dispensing labor, freeing up pharmacists to interact more with patients.
Despite retailers reporting heavy front-store hits last year due to COVID-19, Walgreens sales remained largely unscathed by the pandemic, up 3% year over year to almost $140 billion. However, the pandemic did drag down operations. The retailer estimates COVID-19 shaved about $1.2 billion off its operating income last year.
With the finalization of the sale, first announced in January, Walgreens is divesting a segment that brought in $19 billion in revenue last year. Alliance, a pharmacy wholesaler, essentially acts as a middleman between drug manufacturers and customers, including hospitals and drugstore chains. The business supplies more than 115,000 pharmacies, physicians and health centers in Europe and Egypt.
The acquisition applies to Alliance's global healthcare business, including in the United Kingdom, with the exception of China, Italy and Germany.
Walgreens and AmerisourceBergen have a relationship stretching back to 2013, under which Walgreens is the largest shareholder in the Chesterbrook, Pennsylvania-based company, owning roughly 30% of shares.
Along with the deal, the two companies plan to extend and expand existing commercial agreements to drive growth. That includes extending their U.S. distribution agreement by three years, until 2029, and pursuing new opportunities in sourcing and distribution.
Alliance Healthcare UK will also remain the distribution partner of Boots until 2031.
Walgreens and AmerisourceBergen have previously said the agreement will expand distribution networks for specialty medicines, including cell and gene therapies. Both companies' stock rose in morning trading Wednesday following news of the deal's completion.