Walgreens Sells Pharmacy Wholesale Unit To AmerisourceBergen For $6.5B

Walgreens Boots Alliance Inc (NASDAQ: WBA) disclosed on Wednesday that it had signed an agreement with healthcare products distributor AmerisourceBergen Corp (NYSE: ABC) to sell a majority stake in its Alliance Healthcare business. The deal is valued at $6.5 billion and is expected to close by the end of the fiscal year 2021.

What Happened: Of the total transaction value, AmerisourceBergen will pay $6.275 billion in cash and the balance by the issue of 2 million shares. Walgreens Boots Alliance, on the other hand, plans to grow its retail pharmacy business.

Both the companies have also agreed to extend their distribution agreement in the U.S. by three years through 2029. The U.K. division of Alliance Healthcare will continue to act as Boots’ distribution partner for the next ten years.

The whole pharmacy unit sale comes as Walgreens intends to focus on its retail pharmacies and health initiatives since it faces fresh competition from Amazon.com Inc. (NASDAQ: AMZN) and rival CVS Health Corp (NYSE: CVS), the Wall Street Journal notes.

Why Does It Matter: Benefits from the Walgreens – AmerisourceBergen deal are expected to grow for the next three years and achieve annual run-rate synergies of approximately $150 million in the fourth year. Both companies will share financial benefits in equal proportions.

In the first year, AmerisourceBergen’s adjusted diluted EPS is anticipated to grow in the high-teens.

The free cash flow for AmerisourceBergen and Alliance Healthcare could collectively increase by 125% of AmerisourceBergen’s stand-alone forecasts.

Walgreens Boots Alliance’s adjusted EBITDA in FY2021 for the Alliance healthcare business is estimated between $575 million to $580 million.

Price Action: On Wednesday, WBA shares gained 4.54% to close at $43.03, and ABC rallied 8.6% to close at $106.17.

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