AmerisourceBergen to Buy Walgreens Health Unit for $6.5 Billion

AmerisourceBergen Corp. is buying Walgreens’ health unit, Alliance Healthcare, for roughly $6.5 billion in cash and stock, Bloomberg reports.

Why It Matters: Alliance Healthcare is one of the biggest drug distributors in Europe, a shrewd grab for AmerisourceBergen, which plans to rev up its overseas operations. Meanwhile, the deal allows Walgreens to recenter its focus onto its core pharmacy unit. The debt-laden pharmacy chain has watched sales drastically decline due to Covid-19.

The Details:

1. The deal includes $6.275 billion in cash and 2 million shares of Amerisource common stock, making Walgreens AmerisourceBergen’s most significant stakeholder at 30%.
2. It will not “include operations in China, Italy and Germany and Alliance Healthcare UK will remain a partner of Walgreens’ country unit until 2031.”
3. Walgreens will also extend its agreement to source branded and generic drugs from AmerisourceBergen in the U.S. by three years until 2029.

Reuters reported in May of last year that a potential deal could be in the works, while Walgreens explored going private in 2019.

• Coincidentally, this deal marked the second sizeable health-care acquisition in the span of a few hours, with UnitedHealth Group agreeing to purchase Change Healthcare for around $8 billion.

The Outlook: The deal is expected to close in September, which is the end of AmerisourceBergen’s 2021 fiscal year. AmerisourceBergen and Walgreens gained 3.8% and 2.4%, respectively, in early U.S. trading on the news.