AmerisourceBergen to Acquire Alliance
Healthcare Businesses from Walgreens Boots Alliance for $6.5
Billion
Allows Walgreens Boots Alliance to Increase Its
Focus on Further Growing Its Core Retail Pharmacy Businesses
In Addition to the Acquisition, Companies
Extend and Expand U.S. Commercial Agreements through 2029 to Drive
Incremental Growth
AmerisourceBergen Corporation (NYSE: ABC) and Walgreens Boots
Alliance, Inc. (Nasdaq: WBA) today announced strategic agreements
under which AmerisourceBergen will acquire the majority of
Walgreens Boots Alliance’s Alliance Healthcare businesses for
approximately $6.5 billion, comprised of $6.275 billion in cash and
2 million shares of AmerisourceBergen common stock.
AmerisourceBergen’s acquisition of Alliance Healthcare will
provide even stronger support for pharmacies and pharmacists across
the globe and integrated solutions for pharmaceutical
manufacturers. Walgreens Boots Alliance will be able to increase
its focus on expanding its core retail pharmacy businesses,
bringing even greater healthcare offerings to patients and
customers and further accelerating its progress on its clear set of
strategic priorities.
In addition to this transaction, the two companies have agreed
to strengthen their strategic partnership by extending and
expanding their commercial agreements. Their U.S. distribution
agreement will be extended by three years until 2029 and their
partnership is being expanded to include a commitment to pursue
additional opportunities in sourcing and distribution. Furthermore,
Alliance Healthcare UK will remain the distribution partner of
Boots until 2031. Together, these agreements are expected to create
incremental growth, synergies and efficiencies.
“This strategic agreement with AmerisourceBergen, which we
consider to be the world’s leading pharmaceutical wholesaler, is a
very positive development for the two companies. This deal will
enable significant value creation for both companies and will
generate new synergies in addition to those already captured. It is
a logical step following the success of our long-term strategic
relationship with AmerisourceBergen which has been a strong and
trusted partner since 2013,” said Stefano Pessina, Executive Vice
Chairman and CEO, Walgreens Boots Alliance. “The transaction will
fuel higher future investments to grow and transform our core
retail pharmacy and healthcare businesses, and is EPS accretive
long-term for Walgreens Boots Alliance.”
“AmerisourceBergen’s vital role in the health system as a key
pillar of pharmaceutical innovation and access has been on full
display over the past year,” said Steven Collis, Chairman,
President & Chief Executive Officer of AmerisourceBergen.
“AmerisourceBergen’s financial and strategic position enable this
next evolution of enhancing our ability to provide healthcare
capabilities across regions and deliver innovative solutions for
our upstream and downstream partners. Today’s announcements will
expand our reach and solutions in pharmaceutical distribution and
add to AmerisourceBergen’s breadth and depth of global manufacturer
services, supporting our ability to create differentiated value for
all our stakeholders. I look forward to extending and expanding our
successful partnership with Walgreens Boots Alliance and welcoming
the industry-leading team at Alliance Healthcare to
AmerisourceBergen. Together, we will fulfill AmerisourceBergen’s
purpose of being united in our responsibility to create healthier
futures.”
These announcements between the two global enterprises continue
to build on the close partnership and strong foundation that began
in 2013. Walgreens Boots Alliance is the largest shareholder of
AmerisourceBergen with a stake of nearly 30 percent, and Ornella
Barra, Co-Chief Operating Officer, Walgreens Boots Alliance, is a
Board Member of AmerisourceBergen.
Strategic and Financial Summary
The Alliance Healthcare transaction and expanded strategic
agreement are expected to:
- Extend AmerisourceBergen’s distribution presence with the
addition of an established European leader and AmerisourceBergen’s
global platform of higher-margin manufacturer services to support
pharmaceutical innovation. As one of the largest pharmaceutical
wholesalers in Europe, Alliance Healthcare will extend
AmerisourceBergen’s core wholesale, distribution, and related
solutions capabilities. The addition of Alliance Healthcare will
enhance AmerisourceBergen’s existing global platform of
manufacturer services and further its ability to support global
access. Alliance Healthcare partners with healthcare companies and
professionals to deliver a range of logistics and supply chain
services and innovative solutions to help improve patient care.
Global reach and specialty logistics capabilities are vital with
rapidly accelerating pharmaceutical innovation, particularly for
specialty medicines and with the advancement of cell and gene
therapies.
- Allow Walgreens Boots Alliance to increase its focus on
growing and transforming its core retail pharmacy and healthcare
businesses, facilitate higher growth investments and accelerate
its strategic goals.
- Extend and Expand Strategic Partnership in the United
States. In addition to the transaction announced today,
Walgreens Boots Alliance and AmerisourceBergen have extended their
U.S. strategic partnership through 2029. The extended agreement
will create incremental growth and efficiencies in sourcing,
logistics and distribution. These initiatives support Walgreens
pharmacy operations and enhance AmerisourceBergen’s ability to
create differentiated value for all its customers. Walgreens Boots
Alliance and AmerisourceBergen expect the financial benefits of the
expansion of their U.S. strategic partnership to ramp over the next
three years to achieve annual run-rate synergies in the fourth year
of at least $150 million, which will be shared equally between the
two companies.
- Enhance AmerisourceBergen’s scale and margin profile.
Alliance Healthcare will strengthen AmerisourceBergen’s platform to
deliver continued growth across pharmaceutical distribution and
manufacturer services.
Transaction Details
Under the terms of the purchase agreement, which has been
approved by the AmerisourceBergen and Walgreens Boots Alliance
Boards of Directors, AmerisourceBergen will pay WBA $6.275 billion
in cash, subject to a customary working capital and net-debt
adjustment, and deliver 2 million shares of AmerisourceBergen
common stock at closing of the transaction. AmerisourceBergen
expects to fund the cash purchase price through a combination of
cash on hand and new debt financing.
The transaction, which is expected to close by
AmerisourceBergen’s fiscal year-end 2021, is subject to the
satisfaction of customary closing conditions, including receipt of
required regulatory approvals. Walgreens Boots Alliance’s
operations in China, Italy and Germany are not part of this
transaction.
Upon closing, the acquisition of Alliance Healthcare is expected
to deliver high-teens percentage accretion to AmerisourceBergen's
adjusted diluted EPS in the first fiscal year. 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. Please refer to the
Supplemental Information Regarding Non-GAAP Financial Measures
below for additional information. AmerisourceBergen expects to
maintain its strong investment grade credit rating, and the
positive contribution to cash generation will support debt
reduction in the years following transaction close. This
acquisition is expected to have no impact on AmerisourceBergen’s
dividend policy.
Effective from Walgreens Boots Alliance second quarter FY2021
earnings, the businesses sold will be classified as “businesses
held for sale” with FY2020 revenues of approximately $19 billion,
and adjusted EBITDA of approximately $540 million. Walgreens Boots
Alliance expects FY2021 adjusted EBITDA to be in the range of $575
million to $580 million for these Alliance Healthcare businesses.
The transaction will be slightly dilutive in the current financial
year for Walgreens Boots Alliance, but will be accretive
longer-term.
Advisors
J.P. Morgan Securities LLC is serving as exclusive financial
advisor and Cravath, Swaine & Moore LLP, Hogan Lovells
International LLP and Morgan, Lewis & Bockius LLP are serving
as legal advisors to AmerisourceBergen. Fully committed financing
for the transaction has been provided by JPMorgan Chase Bank, N.A.
Centerview Partners is serving as financial advisor and Cleary
Gottlieb Steen & Hamilton LLP and Baker McKenzie LLP are
serving as legal advisors to Walgreens Boots Alliance.
Conference Call Information
AmerisourceBergen will host a conference call today at 8:30 a.m.
ET. Participating in the conference call will be:
- Steven H. Collis, Chairman, President & Chief Executive
Officer
- James F. Cleary, Executive Vice President & Chief
Financial Officer
The dial-in number for the live call will be (844) 808-6694.
From outside the United States, dial +1 (412) 317-5282. The live
call will also be webcast via the Company’s website at
investor.amerisourcebergen.com. Users are encouraged to log on to
the webcast approximately 10 minutes in advance of the scheduled
start time of the call.
Replays of the call will be made available via telephone and
webcast. A replay of the webcast will be posted on
investor.amerisourcebergen.com approximately two hours after the
completion of the call and will remain available for 30 days. The
telephone replay will also be available approximately two hours
after completion of the call and will remain available for seven
days. To access the telephone reply from within the U.S., dial
(877)-344-7529. From outside the U.S., dial +1 (412)-317-0088. The
access code for the replay is 10151119.
About AmerisourceBergen
AmerisourceBergen provides pharmaceutical products,
value-driving services and business solutions that improve access
to care. Tens of thousands of healthcare providers, veterinary
practices and livestock producers trust us as their partner in the
pharmaceutical supply chain. Global manufacturers depend on us for
services that drive commercial success for their products. Through
our daily work—and powered by our 22,000 associates—we are united
in our responsibility to create healthier futures.
AmerisourceBergen is ranked #10 on the Fortune 500, with more than
$185 billion in annual revenue. The company is headquartered in
Valley Forge, Pa. and has a presence in 50+ countries. Learn more
at investor.amerisourcebergen.com.
About Walgreens Boots
Alliance
Walgreens Boots Alliance (Nasdaq: WBA) is a global leader in
retail and wholesale pharmacy, touching millions of lives every day
through dispensing and distributing medicines, its convenient
retail locations, digital platforms and health and beauty products.
The company has more than 100 years of trusted health care heritage
and innovation in community pharmacy and pharmaceutical
wholesaling.
Including equity method investments, WBA has a presence in more
than 25 countries, employs more than 450,000 people and has more
than 21,000 stores.
WBA’s purpose is to help people across the world lead healthier
and happier lives. The company is proud of its contributions to
healthy communities, a healthy planet, an inclusive workplace and a
sustainable marketplace. WBA is a participant of the United Nations
Global Compact and adheres to its principles-based approach to
responsible business. The company’s businesses have been recognized
for their Corporate Social Responsibility. Walgreens was named to
FORTUNE* magazine’s 2019 Companies that Change the World list and
Boots UK was recognized as Responsible Business of the Year
2019-2020 by Business in the Community.
WBA is included in FORTUNE’s 2020 list of the World’s Most
Admired Companies. This is the 27th consecutive year that WBA or
its predecessor company, Walgreen Co., has been named to the
list.
More company information is available at
www.walgreensbootsalliance.com.
Supplemental Information Regarding AmerisourceBergen’s
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP),
AmerisourceBergen uses the non-GAAP financial measures described
below. The non-GAAP financial measures should be viewed in addition
to, and not in lieu of, financial measures calculated in accordance
with GAAP. These supplemental measures may vary from, and may not
be comparable to, similarly titled measures by other companies.
The non-GAAP financial measures are presented because management
uses non-GAAP financial measures to evaluate AmerisourceBergen’s
operating performance, to perform financial planning, and to
determine incentive compensation. Therefore, AmerisourceBergen
believes that the presentation of non-GAAP financial measures
provides useful supplementary information to, and facilitates
additional analysis by, investors. The presented non-GAAP financial
measures exclude items that management does not believe reflect
core operating performance because such items are outside the
control of AmerisourceBergen, or are inherently unusual,
non-operating, unpredictable, non-recurring, or non-cash.
AmerisourceBergen has provided non-GAAP fiscal year 2021
guidance that estimates the impact of the Alliance Healthcare
acquisition on adjusted diluted EPS and adjusted free cash flow
(each as defined below), which excludes significant items that are
outside the control of AmerisourceBergen or inherently unusual,
non-operating, unpredictable, non-recurring or non-cash in nature.
AmerisourceBergen does not provide forward looking guidance on a
GAAP basis for such metrics because certain financial information,
the probable significance of which cannot be determined, is not
available and cannot be reasonably estimated.
AmerisourceBergen defines the following non-GAAP financial
measures as follows:
- Adjusted diluted EPS: For fiscal year 2021, adjusted diluted
EPS excludes the per share impact of certain adjustments including
gain from antitrust litigation settlements; LIFO expense (credit);
acquisition-related intangibles amortization; and employee
severance, litigation, and other; in each case net of the tax
effect calculated using the applicable effective tax rate for those
items. In addition, the per share impact of changes to tax rules
and regulations are typically excluded from adjusted diluted EPS.
AmerisourceBergen management believes that this non-GAAP financial
measure is useful to investors because it eliminates the per share
impact of the items that are outside the control of
AmerisourceBergen or that are not considered to be indicative of
ongoing operating performance due to their inherent unusual,
non-operating, unpredictable, non-recurring, or non-cash
nature.
- Adjusted free cash flow: For fiscal year 2021,
AmerisourceBergen has defined the non-GAAP financial measure of
adjusted free cash flow as net cash provided by operating
activities, excluding other significant unpredictable or
non-recurring cash payments or receipts relating to legal
settlements, minus capital expenditures. AmerisourceBergen
management believes that this non-GAAP financial measure is useful
to investors because it eliminates the impact of items that are
unusual, unpredictable, and non-recurring in nature.
Supplemental Information Regarding Walgreens Boots Alliance’s
Non-GAAP Financial Measures
The following information provides reconciliations of the
supplemental non-GAAP financial measures, as defined under SEC
rules, presented in this press release to the most directly
comparable financial measures calculated and presented in
accordance with generally accepted accounting principles in the
United States (GAAP). The company has provided the non-GAAP
financial measures in the press release, which are not calculated
or presented in accordance with GAAP, as supplemental information
and in addition to the financial measures that are calculated and
presented in accordance with GAAP.
These supplemental non-GAAP financial measures are presented
because management has evaluated the company’s financial results
both including and excluding the adjusted items or the effects of
foreign currency translation, as applicable, and believes that the
supplemental non-GAAP financial measures presented provide
additional perspective and insights when analyzing the core
operating performance of the company’s business from period to
period and trends in the company’s historical operating results.
These supplemental non-GAAP financial measures should not be
considered superior to, as a substitute for or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the press release. The company does
not provide a reconciliation for non-GAAP estimates on a
forward-looking basis where it is unable to provide a meaningful or
accurate calculation or estimation of reconciling items and the
information is not available without unreasonable effort. This is
due to the inherent difficulty of forecasting the timing or amount
of various items that have not yet occurred, are out of the
company’s control and/or cannot be reasonably predicted, and that
would impact diluted net earnings per share, the most directly
comparable forward-looking GAAP financial measure. For the same
reasons, the company is unable to address the probable significance
of the unavailable information. Forward-looking non-GAAP financial
measures provided without the most directly comparable GAAP
financial measures may vary materially from the corresponding GAAP
financial measures.
- Alliance Healthcare adjusted EBITDA: Adjusted EBITDA for the
portion of Alliance Healthcare being purchased by AmerisourceBergen
is a non-GAAP financial measure that excludes depreciation and
amortization and other items primarily relating to Walgreens Boots
Alliance’s ongoing transformational cost management program from
operating income.
$ in millions
FY20
Operating income
$319
Depreciation & Amortization
141
EBITDA
460
Transformational cost management
program
62
Others
18
Adjusted EBITDA
$540
Cautionary Note Regarding Forward-Looking Statements
This communication contains “forward-looking statements”. These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include, without limitation,
statements about the proposed acquisition and related strategic
transactions, the expected timetable for completing the proposed
acquisition and related strategic transactions, the benefits and
synergies of the proposed acquisition and related strategic
transactions, future opportunities for AmerisourceBergen and WBA
and any other statements regarding AmerisourceBergen’s, Alliance
Healthcare’s or WBA’s future operations, financial or operating
results, capital allocation, dividend policy, debt ratio,
anticipated business levels, future earnings, planned activities,
anticipated growth, market opportunities, strategies, competitions,
and other expectations and targets for future periods.
Forward-looking statements may often be identified by the use of
words such as “will”, “may”, “could”, “should”, “would”, “project”,
“believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”,
“potential”, “intend”, “continue”, “target” and variations of these
words or comparable words. Because forward-looking statements
inherently involve risks and uncertainties, actual future results
may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause or contribute
to such differences include, but are not limited to: the parties’
ability to meet expectations regarding the timing of the proposed
acquisition and related strategic transactions; the parties’
ability to consummate the proposed acquisition and related
strategic transactions; the conditions to the completion of the
proposed acquisition and related strategic transactions; the
regulatory approvals required for the proposed acquisition and
related strategic transactions not being obtained on the terms
expected or on the anticipated schedule or at all; inherent
uncertainties involved in the estimates and judgments used in the
preparation of financial statements and the providing of estimates
of financial measures, in accordance with GAAP and related
standards, or on an adjusted basis; the integration of Alliance
Healthcare into AmerisourceBergen being more difficult, time
consuming or costly than expected; AmerisourceBergen’s or Alliance
Healthcare’s failure to achieve expected or targeted future
financial and operating performance and results; the possibility
that the combined company may be unable to achieve expected
benefits, synergies and operating efficiencies in connection with
the proposed acquisition and related strategic transactions within
the expected time frames or at all; customer loss and business
disruption being greater than expected following the proposed
acquisition and related strategic transactions; the retention of
key employees being more difficult following the proposed
acquisition and related strategic transactions; the effect of any
changes in customer and supplier relationships and customer
purchasing patterns; the impacts of competition; changes in the
economic and financial conditions of the business of
AmerisourceBergen or Alliance Healthcare; and uncertainties and
matters beyond the control of management and other factors
described under “Risk Factors” in each of AmerisourceBergen’s and
WBA’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and other filings with the SEC. You can access AmerisourceBergen’s
or WBA’s filings with the SEC through the SEC website at
www.sec.gov or through AmerisourceBergen’s or WBA’s website, and
AmerisourceBergen and WBA strongly encourage you to do so. Except
as required by applicable law, AmerisourceBergen, Alliance
Healthcare and WBA undertake no obligation to update any statements
herein for revisions or changes after the date of this
communication.
(WBA-GEN)
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version on businesswire.com: https://www.businesswire.com/news/home/20210106005378/en/
AmerisourceBergen
Investors: Bennett S. Murphy +1 610-727-3693
bmurphy@amerisourcebergen.com
Media: Gabe Weissman +1 610-727-3696
gweissman@amerisourcebergen.com
Walgreens Boots Alliance
Investors: Gerald Gradwell and Jay Spitzer +1
847-315-2922
Media: Media Relations USA / Aaron Radelet and
Morry Smulevitz +1-847-315-0517 International
+44-(0)20-7980-8585
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