In an effort to focus on its growing retail pharmacy division, a network of more than 9,000 stores, Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is selling its Alliance Healthcare business to AmerisourceBergen Corporation (NYSE: ABC). The deal, valued at $6.5 billion, is comprised of $6.275 billion in cash and 2 million shares of AmerisourceBergen common stock for a majority interest. The Alliance Healthcare business supplies medicines, other healthcare products and related services to more than 115,000 pharmacies, doctors, health centers and hospitals each year from 306 distribution centers in 11 countries. AmerisourceBergen sources and distributes pharmaceutical products to healthcare providers, pharmaceutical and biotech manufacturers and specialty drug patients.
For the 2020 fiscal year, Alliance Healthcare generated approximately $19 billion in revenue and has an estimated annual EBITA of $540 million.
AmerisourceBergen and Walgreens will have an extended distribution agreement until 2029 and 2031 in the U.K. AmerisourceBergen expects synergies from the acquisition of Alliance Healthcare to ramp to an annual run-rate of $75 million in the fourth year. Adjusted free cash flow of the combined AmerisourceBergen and Alliance Healthcare businesses are expected to increase to 125% of AmerisourceBergen’s stand-alone estimates. The deal will also help expand AmerisourceBergen’s presence in Europe, as Alliance is one of the largest wholesalers on the continent.
Although Walgreens hasn’t reported much M&A activity as of late, according to search results in our Healthcare Deal database, the company has focused on other ventures to compete with rivals such as CVS (NYSE: CVS). In July 2020, Walgreens and VillageMD announced a partnership for up to 500 to 700 “Village Medical at Walgreens” physician-led primary care clinics in more than 30 U.S. markets in the next five years, with the intent to build hundreds more thereafter.
In late 2019 and 2020, there were reports swirling that private equity firm KKR (NYSE: KKR) offered to take Walgreens private in a $70 billion deal, so we’ll see if the divestment of Alliance Healthcare will ignite talks once again.