US giant Walgreen to buy 45pc stake in Boots for €5bn
WALGREEN, a huge US drugstore chain, said it would buy a 45pc stake in the Boots chemist chain for $6.7bn (€5.2bn) in a cash-and-stock deal that would bring together the two largest pharmacy chains in the US and Europe.
Walgreen, which has the option to buy the rest of Alliance Boots in the next three years, said it would pay $4bn in cash and 83.4m shares for the stake.
Boots, which has 72 branches in Ireland, is owned by legendary private equity firm KKR. KKR, which invested $2.45bn in Alliance Boots in 2007, will receive $2bn in cash and stock and will gain a seat on Walgreen's board.
The combined business would have more than 370 distribution centres delivering to more than 170,000 pharmacies, doctors, health centres and hospitals in 21 countries. It will also be the world's largest buyer of prescription drugs and many other health products.
"This is potentially one of the most important moves in European retail history,'" said Bryan Roberts, director at Kantar Retail in London.
"Walgreens is still a US business so its desire to achieve more a global footprint will be a game-changer. This gets them into Europe and Asia."
Walgreen will be the world's largest buyer of prescription drugs, chief executive Gregory Wasson said yesterday. The purchase will help the company get into emerging markets around the world, he said.
The deal will lead to cost and revenue benefits across both companies of $100m to $150m in the first year and $1bn by the end of 2016, according to the company.
The US drugstore owner has lined up $3.5bn of short-term debt financing from Goldman Sachs and Bank of America Merrill Lynch to help fund the acquisition, according to KKR. Walgreen plans to replace the bridge facility with permanent financing at a later stage.
Boots, based in Nottingham, England, owns more than 3,200 stores globally. Last month it reported a 12pc rise in annual profit, driven by its wholesale pharmaceuticals business.
Walgreen completed the purchase of a mail-service pharmacy businesses last month in a deal valued at $225m. The chain, which also sells general merchandise, got 65pc of its revenue that year from prescription drug sales.