Walgreens Boots Alliance divests wholesale business

Date : 07 January 2021

Stewart Samuel

Program Director - Canada

Walgreens Boots Alliance (Walgreens) is divesting the majority of its Alliance Healthcare business to AmerisourceBergen Corporation in a $6.5bn deal.

Expanding AmerisourceBergen’s distribution presence

Alliance Healthcare provides logistics and supply chain services to Walgreens Boots Alliance and other retail pharmacies, mainly in Europe. For AmerisourceBergen’s, the deal will expand its distribution presence, especially in Europe, enable it to grow the breadth and depth of global manufacturer services and better support the pharmacies its services.

Enables stronger focus on core retail pharmacy business

The divestment will enable Walgreens to increase its focus on its core retail pharmacy operations. The retailer has set out an ambitious agenda to transform its retail pharmacies. The funds from the sale are expected to be used in part to accelerate this, support the development of new neighbourhood-led healthcare service offerings and drive digitalisation. Omnichannel investments will be a key part of this along with personalisation initiatives. 

Builds on existing partnership

This agreement builds on the strategic partnership which has been in place between the two organisations since 2013. Walgreens Boots Alliance is the largest shareholder of AmerisourceBergen with a stake of nearly 30%. Ornella Barra, Co-Chief Operating Officer, Walgreens Boots Alliance, is a Board Member of AmerisourceBergen.

Additional opportunities in sourcing and distribution

The two companies will also extend their US strategic partnership through to 2029 to pursue additional opportunities in sourcing and distribution. Alliance Healthcare UK will remain the distribution partner of Boots until 2031. The companies expect the financial benefits of this expansion to ramp over the next three years to achieve annual run-rate synergies in the fourth year of at least $150m, which will be shared equally between them.

Accelerating investment in VillageMD

Separately, the drugstore operator also plans to accelerate its investment in VillageMD to support the opening of 600 to 700 Village Medical at Walgreens primary care clinics in more than 30 US markets within the next four years. Last July, the two companies announced an expansion of their partnership with plans to open 500 to 700 clinics, supported by WBA’s investment in VillageMD over three years of $1bn in equity and convertible debt. This included an initial $250m equity investment. The companies have renegotiated their agreement to enable WBA to increase the pace and scale of the roll-out of the clinics.

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