Zinger Key Points
- Walgreens Boots settles prepaid share contracts early, generating $300M in proceeds.
- WBA reduces Cencora stake from 10% to 6% to support debt reduction.
- Brand New Membership Level: Benzinga Trade Alerts
On Thursday, Walgreens Boots Alliance, Inc. WBA reached an agreement for the early settlement of certain prepaid variable share forward transactions related to shares of Cencora, Inc. COR.
As part of the early settlement, Walgreens Boots will transfer approximately 6.1 million Cencora shares to the financial institutions and make a net cash payment of about $20 million.
Alongside this, the company executed a sale of the remaining 1.3 million shares of Cencora pledged under the early settled contracts. The company receives approximately $300 million from the early settlement and the concurrent sale of shares.
Following this settlement, WBA retains 12.6 million Cencora shares under remaining prepaid contracts, set to mature primarily in March, June, and September 2025, with the potential for additional cash proceeds.
The proceeds will primarily be used for debt reduction and general corporate purposes. The transactions were scheduled to mature in March and June 2026.
By settling early and executing a concurrent share sale, WBA is realizing the embedded cash value of the prepaid variable share forwards. With this settlement, Walgreens has lowered its stake in Cencora from 10% to 6%.
Notably, Walgreens has been cutting its stake in Concera for the last few years, decreasing the stake from 12% to 10% for around $1.1 billion in August 2024.
Also, in May 2024, Walgreens reduced ownership of Cencora shares from 13% to 12% for approximately $400 million.
These transactions, along with other recent measures such as the dividend suspension, further strengthen WBA’s ability to address its upcoming debt maturities in fiscal 2026.
Last month, the company announced it is halting its quarterly dividend while the management team reviews and adjusts its capital allocation strategy to match the company’s broader long-term recovery efforts.
Investors can gain exposure to the stock via Invesco High Yield Equity Dividend Achievers ETF PEY and Invesco S&P 500 Equal Weight Consumer Staples ETF RSPS.
Price Action: WBA shares are up 0.40% at $10.09 premarket at the last check Friday.
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