Walgreens to sell drug wholesale business for USD6.5B

AP – Walgreens Boots Alliance will sell its pharmaceutical wholesale business to AmerisourceBergen in a USD6.5-billion cash and stock deal.

Pharmaceutical wholesalers essentially act as middlemen, purchasing drugs from manufacturers and then distributing them to customers like drugstore chains, hospitals and doctor’s offices.

Walgreens said on Wednesday the deal will allow it to focus more on expanding its core retail pharmacy business which, like others, has been rattled by the COVID-19 pandemic.

Drugstore chains and other retailers were hit hard, particularly last spring, when the pandemic forced shoppers to stay home and away from their stores.

Walgreens estimated in October that the pandemic shaved about USD520 million from its operating income in its final quarter of fiscal 2020. But the drugstore chain also grew sales and prescriptions in the United States (US) and saw some improvement through its Boots stores in the United Kingdom (UK)

Walgreens Boots Alliance to sell its pharmaceutical wholesaler business to AmerisourceBergen in a USD6.5-billion cash and stock deal. PHOTO: AP

Deerfield, Illinois-based Walgreens Boots Alliance Inc runs more than 21,000 stores mainly in the US and UK. Drugstores are the main focus of its business, unlike main rival CVS Health Corp, which also operates large insurance and pharmacy benefit management businesses.

AmerisourceBergen will pay nearly USD6.3 billion in cash and two million shares of its common stock for Walgreens’ Alliance Healthcare business in a deal the companies expect to close by September. Walgreens already owns a nearly 30 per cent stake in AmerisourceBergen.

Alliance Healthcare supplies over 115,000 pharmacies, physicians and health centres in Europe and Egypt.

The companies also said on Wednesday that they will extend their US distribution agreement by three years, until 2029.

Walgreens said in November it was combining its wholesale business in Germany with McKesson Corp, and it would control 70 per cent of that venture. A Walgreens spokesman said on Wednesday the McKesson joint venture was not part of the Amerisource deal.

Shares of AmerisourceBergen Corp, based in Chesterbrook, Pennsylvania, jumped over eight per cent to USD105.78 on Wednesday afternoon. Walgreens shares rose more than four per cent to USD43.10. Both eclipsed the more than one per cent increase from the Dow Jones industrial average, of which Walgreens is a component.