Walgreens-Boots Merger Moving Ahead of Schedule

Walgreens said it has exercised its option to complete the second step of its strategic transaction with Alliance Boots GmbH ahead of the original option period, which was between February and August 2015. The transaction, subject to shareholder and various regulatory approvals, would fully combine the two companies to form the first global pharmacy-led, health and well-being enterprise.

This action follows the launch of the companies’ long-term strategic partnership in June 2012, when Walgreens acquired a 45% equity ownership in Alliance Boots, with the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in three years’ time (Step 2). Walgreens expects to close the transaction in the first quarter of calendar 2015.

Walgreens also announced the following decisions related to moving forward with Step 2:

  • A new holding company to be formed in connection with the transaction will be named Walgreens Boots Alliance, Inc., and will include four divisions: Walgreen Co. (the largest drugstore chain in the United States); Boots (the U.K. and Republic of Ireland’s leading pharmacy-led health and beauty retailer); pharmaceutical wholesale and international retail (including Alliance Healthcare); and global brands. In addition, the combined company is establishing a cross-divisional global pharmacy market access group.
  • Upon closing, the combined enterprise will blend senior management from both companies including Walgreens’ president, CEO and board member Greg Wasson who will be president and CEO of Walgreens Boots Alliance, and Stefano Pessina, executive chairman of Alliance Boots, who will be executive vice chairman of the combined company responsible for strategy and M&A reporting to Wasson, and chairman of a new strategy committee of the board of directors.
  • The Walgreens Boots Alliance holding company will be headquartered in the Chicago area, while Walgreens operations will remain headquartered in Deerfield, Illinois. Boots operations also will remain headquartered at its current location in Nottingham, U.K.
  • The company is outlining a new three-year “next chapter” plan through fiscal 2017 that sets strategic goals for the combined company. The plan reflects significant value-creating opportunities for the combined enterprise to drive long-term shareholder value.

This combining of companies will create a new global leader in pharmacy-led health and well-being retail with more than 11,000 stores in 10 countries and an extensive portfolio of retail and business brands, as well as increasingly global health and beauty product brands.

“We are excited to move forward with the next important step in becoming a new kind of global health care leader,” said Wasson. “Expanding globally with Alliance Boots will make quality health care more affordable and accessible to communities here in America and around the world. In addition, Stefano and I are pleased with the comprehensive plan we’ve announced today as part of Step 2. These elements will provide additional shareholder value creation, both in the near and long term. I congratulate our teams for getting us to this point and together we have a bright future.”

Pessina said, “The expected creation of the new enterprise will represent the most significant milestone in the history of Alliance Boots and, importantly, a very positive step for the health care industry as a whole. Together with Walgreens, we have already made good progress over the past two years and I strongly believe that the merger will bring significant growth opportunities for both mature and emerging markets. Today’s announcement reflects the great track record and accomplishments of our people to date and I am convinced that their skills, expertise and commitment will continue to make a positive contribution in the years to come. This combination is a true partnership, further evidenced by the composition of the future management team of Walgreens Boots Alliance.”

Leading Walgreens Boots Alliance will be a top management team led by Wasson and consisting of senior executives from both companies. In addition to Wasson’s and Pessina’s roles, the following appointments are being announced:

  • Ornella Barra, chief executive, wholesale and brands of Alliance Boots, will become executive vice president of Walgreens Boots Alliance and president and chief executive of global wholesale and international retail.
  • Jeff Berkowitz, president of Walgreens Boots Alliance Development GmbH, will serve as executive vice president of Walgreens Boots Alliance and president of pharma and global market access, which will include responsibility for specialty pharmacy.
  • Alex Gourlay, Walgreens president of customer experience and daily living, will become executive vice president of Walgreens Boots Alliance and president of Walgreens.
  • Tim McLevish, previously announced as Walgreens executive vice president and chief financial officer, will serve in that role in a global capacity for Walgreens Boots Alliance.
  • Ken Murphy, managing director, health and beauty international and brands of Alliance Boots, will serve as executive vice president of Walgreens Boots Alliance and president of global brands.
  • Simon Roberts, managing director, health and beauty, UK and the Republic of Ireland of Alliance Boots, will serve as executive vice president of Walgreens Boots Alliance and president of Boots.
  • Tom Sabatino, Walgreens chief administrative officer and general counsel, will serve as executive vice president and global chief legal and administrative officer of Walgreens Boots Alliance.
  • Tim Theriault, chief information, innovation and improvement officer at Walgreens, will assume the role of executive vice president and global chief information officer of Walgreens Boots Alliance.
  • Kathleen Wilson-Thompson, Walgreens chief human resources officer, will become executive vice president and global chief human resources officer of Walgreens Boots Alliance.

With the full combination, Walgreens Boots Alliance will be positioned for a new era of profitable growth and is aggressively pursuing future opportunities to drive sustainable shareholder value over the long term. To do so, the company is launching a new three-year “next chapter” plan that will maximize the scope and scale of the new combined company. Through the plan, core business performance will be accelerated by providing:

  • A differentiated retail experience that transforms the retail model for health and wellness and changes the way women shop for beauty
  • Integrated pharmacy and health care that advance the role of pharmacists and provide access to innovative health care services
  • Global pharmaceutical services that reinvent the pharmaceutical value chain and deliver a seamless specialty pharmacy model

The company’s continuing focus on improving core performance in the near-term at both Walgreens and Alliance Boots also remains a critical component of the Next Chapter plan. “As we launch our global plan, we are more focused than ever on what it will take to compete and succeed on the world stage,” said Wasson. “We are uniquely positioned to be a leader and a champion for accessible, affordable health care, and that means continuing to innovate, to find new ways to be as efficient as possible, and more agile and nimble as we compete in the worldwide market. We also are encouraged by the improving performance of our daily living business and the further potential of our expanded beauty and own brands portfolio to drive margin expansion.”

Additional information about the next steps of this merger are available here.

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