Retail News Breaks
Walgreens goes overseas for Analyst Day
February 13th, 2013
LONDON – By geography alone, the location of Walgreen Co.'s annual Analyst Day event signifies the company's historic transformation with the integration of Alliance Boots.
Speaking from London on Wednesday, senior leaders from Walgreens and Alliance Boots outlined both companies' strategic growth drivers, financial performance and synergy programs in a presentation for financial analysts.
If all goes according to plan, the partnership projects total revenue of $130 billion for fiscal 2016 and $1 billion in synergy savings, mostly via economies of scale in the procurement of prescription drugs.
And the entity that Walgreens and Alliance Boots executives envision would be the global leader in community pharmacy and "well-being retailing," with more than 11,000 stores in 12 countries; the No. 1 pharmaceutical wholesaler in terms of items handled, with more than 370 distribution centers in 21 nations; and the world's biggest purchaser of prescription medications and many other health care products.
"I think since our announcement last summer, we have made a lot of progress. And I think we are moving quickly," Walgreens president and chief executive officer Greg Wasson told the gathering of analysts.
"The nature of the health sector is changing across the world, and being the first global pharmacy-led, well-being enterprise is the best possible place we could be," said Alliance Boots executive chairman Stefano Pessina.
Walgreens announced in June that it would acquire a 45% equity interest in Alliance Boots for $6.7 billion in cash and stock. That part of the two-step deal was completed in early August.
Under the agreement, Walgreens has the option to buy the remaining 55% of Alliance Boots in about three years for $9.5 billion in cash and stock. During the six-month period starting two-and-a-half years after the closing of the initial investment, Walgreens can choose to proceed to a full combination and purchase the remaining 55% equity interest in Alliance Boots.
Walgreens executives, however, have said since the deal was announced that all indications are that the company will proceed with the second phase of the agreement.
At the end of October, Walgreens and Alliance Boots reported that they have set up a joint venture company as part of their partnership.
Called Walgreens Boots Alliance Development GmbH, the new company was created for the partners' synergy program. The joint venture is based in Bern, Switzerland.
A global pharmaceutical, health and beauty retailer and wholesaler, Alliance Boots has its operational headquarters in the United Kingdom but is based in Switzerland.
"You will often hear both Greg and I speak of the genuine collaboration between the Walgreens and Alliance Boots team. It is inspired by real spirit of partnership and the strong desire to work together. This attitude is the key to our success as individual companies. And, of course, it will be the same for the combined group," Pessina said Wednesday at the Analyst Day event.
"Both similarities and differences, of course, are crucial to delivering the true benefits and value of this merger. The common grounds deliver efficiencies and savings and form a platform from which to grow. The differences are inspiration and catalyst of innovation and expansion," he explained. "But obviously a deal like this is all about building a platform for growth — far beyond exploiting the synergies."
Pessina, too, pointed out to analysts that "no one has done this before."
"So whatever synergies and avenues for growth we can show today, they are only a fraction of the opportunities that will appear in the future," he said.
That point was echoed by Wasson. "We're in two great industries, retail and health care. We have unmatched assets and have absolute certainty where our center of gravity lies," he said.
"We now have terrific partners with Stefano and his team at Alliance Boots to become the first choice for health, daily living and beyond. And as I said, we have two iconic brands that I think is going to be very difficult if not impossible to replicate."
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