Print | Share | Reprint

Walgreens acquires KKR-backed Alliance Boots

by Jonathan Braude in London | Published June 19, 2012 at 9:25 AM

U.S. drug store chain Walgreen Co. prescribed itself a massive dose of M&A happy pills Tuesday, June 19, agreeing to acquire its private equity-backed British peer Alliance Boots GmbH in a cash and shares deal valuing the U.K company at about $27 billion including debt.

The deal, which brings together the largest drugstore chains on either side of the Atlantic, will provide a partial exit for Alliance Boots owners Kohlberg Kravis Roberts & Co. LP and CEO and significant shareholder Stefano Pessina.

The transaction will take place in two stages. Walgreens will initially buy 45% of Alliance Boots' equity for $6.7 billion, including $4 billion in cash and 83.4 million shares. It has an option to acquire the remaining 55% of the company in three years time for a further $9.5 billion in cash and stock, plus the assumption of Alliance Boots' outstanding debt. As of March 31, the British company declared outstanding borrowings of £7.02 billion ($11.0 billion), down £826 million on the previous year.

KKR, which bought the company with Pessina in 2007, at the height of the credit bubble, said it invested $2.45 billion in the company at the time. It did not immediately clarify how much of its own stake in the business it was selling to Walgreens or how much it would retain in the initial transaction, which is due to close by September 1, 2012. However, KKR's U.K. director Dominic Murphy and Pessina will both join the Walgreens board after the the transaction closes. Walgreens confirmed Pessina's holding vehicle Alliance Santé Participations SA would hold a significant stake in Walgreens and intended to retain it for the long term, while KKR would also be a significant shareholder in Walgreens.

KKR said it would receive $1.8 billion in cash and 7 million Walgreens shares of common stock equivalent to $0.2 billion, at the Walgreens closing share price of $31.96 on June 18, 2012 for its share of the initial 45% stake.

The deal, which will create what Walgreens said would be the first global pharmacy-led health and well-being enterprise, does not include Alliance Boots 25.5% minority interest in Galenica AG, a Zurich listed, Swiss healthcare company. The investment in Galenica will continue to be owned by KKR and Pessina.

Walgreens is taking financial advice from Goldman, Sachs & Co. and a Lazard team led by led by Jeff Cohen, Jerry Rosenfeld and Jason Wooten. It is receiving legal counsel from Wachtell, Lipton, Rosen & Katz and Allen & Overy LLP. Alliance Boots' financial adviser is Centerview Partners Holdings LLP and its legal advisers are Darrois Villey Maillot Brochier and Simpson Thacher & Bartlett LLP.

Share:

Private Equity

Walgreens acquires KKR-backed Alliance Boots

Free preview

Meet the journalists

Jonathan Braude

Senior Writer: Global News

Movers & Shakers

Video

The Deal interview: Bob Landis

Sectors