Walgreen Co. (WAG) agreed to buy a 45% stake in the pharmacy-led
health and beauty group Alliance Boots GmbH in a $6.7 billion cash and
stock deal as it looks to diversify in a changing global health
market.
The drugstore chain also reported its fiscal third-quarter earnings
fell 11% as sales continued to decline on the loss of Express Scripts
Holding Co.'s (ESRX) members. Meanwhile, Walgreen raised its quarterly
dividend 22% to 27.5 cents from 22.5 cents, marking 37 straight years
of annual increases.
Walgreen initially will invest about $4 billion in cash and 83.4
million shares for a minority stake in Alliance Boots. Walgreen will
have the option to acquire the remaining stake in roughly three years.
Alliance Boots has a presence in more than 25 countries and employs
more than 116,000 people. The company operates more than 3,330 health
and beauty retail stores, around 625 optical practices, and its
pharmaceutical wholesale businesses supply medicines, other
health-care products and related services.
Walgreen President and Chief Executive Gregory Wasson, Chief Financial
Officer Wade Miquelon, General Counsel Thomas Sabatino and Chief
Strategy Officer Robert Zimmerman will join Alliance Boots's board.
In addition, Alliance Boots Executive Chairman Stefano Pessina and KKR
& Co. (KKR) director Dominic Murphy will join Walgreen's board.
Walgreen expects the deal to add between 23 cents to 27 cents to
adjusted earnings in the first year.
Walgreen at the end of last year allowed a contract with Express
Scripts to expire, resulting in some clients going elsewhere to fill
their prescriptions. The drugstore giant, which operates more than
8,000 locations, has seen its same-store sales drop for five
consecutive months as the reduced traffic takes its toll.
For the quarter ended May 31, Walgreen reported a profit of $537
million, or 62 cents a share, down from $603 million, or 65 cents, a
year earlier. The most-recent quarter included a charge of one cent a
share related to the Alliance Boots deal, while the year-earlier
quarter included restructuring charges of one cent. Sales dropped 3.4%
to $17.75 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings
of 62 cents on revenue of $17.87 billion.
Gross margin edged up to 28.2% from 28.1%.
Total same-store sales fell 6.6%. Front of the store same-store sales
slipped 0.9%. Same-store customer traffic decreased 2.6%, and basket
size increased 1.7%. Prescription sales dropped 6.6%, while same-store
prescription sales were down 9.9%.
Shares were trading 1.9% higher at $32.57 premarket. The stock has
fallen 3.3% so far this year through Monday's close.
Write to Melodie Warner at melodie.warner@dowjones.com
Walgreens CEO: Every Intention of Bringing the Two Companies Together -CNBC
Walgreen Co. (WAG) Chief Executive Greg Wasson Tuesday said the U.S.
drug store chain, which announced it will acquire a 45% equity stake
in U.K.-based Alliance Boots GmbH, intends to acquire the remaining
portion of the pharmacy-led health and beauty group and complete the
second part of a two-step process.
Wasson, in an interview on CNBC shortly after the deal was announced
early Tuesday, said Walgreen has "every intention" of completing the
final stage of the deal. Under terms of the deal, Walgreen will
initially buy a 45% stake in Alliance Boots with the option to acquire
the remaining stake in roughly three years.
"We have every intention of bringing these two companies together,"
Wasson responded when asked if there was a chance the second part of
the transaction was at risk.
Stefano Passina, executive chairman at Alliance Boots, said the
two-step process would allow the two companies to focus on individual
strategies but then provide a "clear view" on how to organize the
combined company "when the company will be one, as we really hope."
Wasson said the deal will leave Walgreen as the largest buyer of
prescription drugs in the world and will allow the company to consider
expansion into emerging markets.
Write to nymonitoring@dowjones.com
(END) Dow Jones Newswires
June 19, 2012 07:05 ET (11:05 GMT)
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