Walgreens in $6.7 billion deal to acquire 45% stake in Alliance Boots

New York -- Walgreen Co. said Tuesday it will pay $6.7 billion for a 45% stake in European health and beauty retailer Alliance Boots, which is based in Nottingham, England, with an option to buy the rest of the company in about three years. It is the first international venture and biggest deal ever for the U.S. chain.

“This is potentially one of the most important moves in European retail history,” said Bryan Roberts, director at Kantar Retail in London, in a Bloomberg report. “Walgreens is still a U.S. business so its desire to achieve a more global footprint will be a game-changer. This gets them into Europe and Asia.”

The company will spend $4 billion in cash and the remainder in stock to purchase the stake for Boots, which operates more than 3,200 stores in 11 countries.

The deal will create one of the world’s largest drugstore and pharmacy retailers with more than 11,000 stores in 12 countries. The acquisition also would allow Walgreens to expand into overseas markets, and give Boots its long-wanted U.S. presence.

“We are bringing together the strengths and expertise of each company to create a worldwide healthcare platform for the future that can provide innovative ways to address global health and wellness challenges,” said Walgreens CEO Gregory Wasson in a statement. “We are looking forward to working with Alliance Boots to leverage our combined strengths and provide an even broader range of innovative, cost-effective products and services to patients and customers across the healthcare landscape. Together we will be ideally positioned to expand our customer offerings in our existing markets and become the health and wellbeing partner of choice in emerging markets.”

The deal will lead to cost and revenue benefits across both companies of $100 million to $150 million in the first year and $1 billion by the end of 2016, according to the Walgreens statement.

Wasson said the deal is “a partnership, not a takeover,” adding that talks between the companies have been taking place for 18 months, Bloomberg reported. Walgreen will assume Alliance Boots¹s debt in the second phase of the tie-up.

Walgreens in acquiring the stake in Boots from a group led by private equity firm Kohlberg Kravis Roberts and Alliance Boots chairman Stefano Pessina, who joined together to acquire Boots in 2007.

There are no plans for job reductions at either company as a result of the transaction, Walgreens said. The chain said it will maintain its existing headquarters in Deerfield, Ill.; and Alliance Boots remains committed to its current support offices across Europe, as well as keeping the Boots operational hub in Nottingham, England.

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