Walgreens to sell its distribution unit to AmerisourceBergen for £4.78 billion

Walgreens to sell its distribution unit to AmerisourceBergen for £4.78 billion
Written by:
Wajeeh Khan
January 6, 2021
  • Walgreens to sell its distribution unit to AmerisourceBergen for £4.78 billion.
  • The transaction is expected to complete before the start of fiscal 2022.
  • The deal will boost AmerisourceBergen’s adjusted per-share earnings.

In an announcement on Wednesday, Walgreens Boots Alliance Inc (NASDAQ: WBA) said it will sell its distribution business to AmerisourceBergen Corp (NYSE: ABC) for £4.78 billion.

Walgreens shares were seen more than 2% up in premarket trading on Wednesday and jumped another 2.5% in the next few hours. Including the price action, the stock is now trading at £31.69 per share versus a low of £24.64 per share in the last week of October – a good news for the value investors.

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The transaction is likely to complete before the start of fiscal 2022

Following the completion of the transaction that is expected before the start of fiscal 2022, Walgreens intends to focus more on its core businesses, including the pharmacy unit and retail operations. Sales in both these segments took a significant hit in 2020 due to the ongoing Coronavirus pandemic.

AmerisourceBergen, in return, will get to bolster its position in the U.S. healthcare sector once the deal is closed. Bringing Alliance Healthcare under its umbrella will also help it expand its footprint in Europe where Alliance is well-anchored as one of the biggest distributors.

The news comes only months after Walgreens had posted a 2.3% annualised growth in its fourth-quarter sales. CEO Steven Collins of AmerisourceBergen commented on the agreement that excludes operations in Germany, Italy, and China, and said:

“Both our business, and Alliance, have been resilient through COVID-19. The opportunities and awareness about drug wholesale have only expanded in the pandemic.”

The deal will boost AmerisourceBergen’s per-share earnings

The distribution business, as per Walgreens, generated £14.70 billion of sales in 2020 that accounted for roughly 14% of its total full-year revenue. Walgreens currently has a 30% stake in AmerisourceBergen, making it the largest shareholder of the American drug wholesale company.

In separate news from the United States, CVS and Walgreens said that the 1st dose of the COVID-19 vaccine will be administered at the U.S. nursing homes by 25th January.

AmerisourceBergen will pay £4.61 billion to Walgreens in cash, as per the agreement that is likely to boost its adjusted per-share earnings by more than 15%. According to Reuters, the Chesterbrook-based company had started negotiating a potential deal with Walgreens in May 2020.

AmerisourceBergen opened more than 3.5% up in the stock market on Wednesday and gained another 5% in the next few hours. At the time of writing, it is valued at £15.95 billion.