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Walgreens Buys Stake in Alliance Boots

DEERFIELD, Ill. — Walgreen Co. here said last week it has agreed to buy a 45% stake in Alliance Boots, an international supplier and retailer of pharmacy and HBC product, with plans to eventually acquire the entire company.

The move could bring more of Boots’ highly regarded beauty and personal care brands to the U.S. and reduce product procurement costs for the Walgreens and Duane Reade banners.

Greg Wasson“We can truly create a global, pharmacy-led health and well-being platform for the future,” said Greg Wasson, president and chief executive officer, Walgreen Co., in a conference call discussing the agreement. “When you combine the strength and scale of Walgreens-Alliance Boots, we will create the world leader in health care and beauty retail, the largest international wholesale and distribution network in the industry and the largest single purchaser of prescription drugs and many other health and well-being products in the world.”

Walgreen said it would pay $6.7 billion for the 45% stake, including $4 billion in cash and 83.4 million shares of stock. Walgreen will have the option to acquire the remaining 55% in about three years, and Wasson said he expects the company will do so.

The companies said they expect combined synergies of between $100 million and $150 million in the first year and up to $1 billion by the end of 2016.

Wasson said he expects to leverage Boots’ strengths in loyalty programs and beauty-care product development in much the same way that Walgreens leveraged some of Duane Reade’s strengths when it acquired that chain.

The two companies combined will have more than 11,000 stores in 12 countries and about 170,000 customers of Alliance’s wholesale business. Walgreens posted revenues of $72 billion in 2011; Alliance Boots had revenues of about $39.4 billion.

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