Retail News Breaks Archives
Walgreens opens door to global expansion
July 6th, 2012
Alliance Boots' two core businesses, drug retailing and distribution, are both international.
LONDON – The international expansion of a U.S. drug chain was a long time coming, but when it happened it happened with a bang.
After no nonfranchised American pharmacy chain had ventured beyond Puerto Rico, Walgreen Co. has entered countries across the globe with its deal to purchase a 45% interest in Alliance Boots.
The United Kingdom-based group's two core businesses — drug distribution and drug retailing — are both international. And executive chairman Stefano Pessina said the company is confident about its prospects and ability to pursue profitable growth "through further international expansion."
With stores in the United Kingdom, Norway, Ireland, the Netherlands, Lithuania and Russia, Alliance Boots is Europe's No. 1 pharmacy chain.
It also has pharmacies in Thailand, while associates and joint ventures have prescription counters in Switzerland, China, Italy and Croatia. As well, over 50 franchised Boots units operate in the Middle East and Sweden.
And with some 655 practices, including around 190 franchises, Boots Opticians is the United Kingdom’s No. 2 optical chain.
Meanwhile, the group's Alphega network of independent pharmacies in Europe supports more than 3,750 stores across five countries — the Czech Republic, France, Russia, Spain, and the United Kingdom — as well as the Italian associate. Members retain independence while enjoying the full backing of the group's Alliance Healthcare distribution arm.
Partnerships with pharmacists around the world are regarded as a cornerstone of Alliance Boots' overall business. "Our strategy puts pharmacists at the heart of health care within their local communities, and we work closely with them to develop the range of services we provide to meet local health care needs," the company stated.
The group's sponsorship of the European Pharmacists Forum (EPF) highlights its commitment to independent pharmacists. The EPF brings together pharmacists from 10 countries to discuss new ideas and share key messages, as well as to facilitate dialogue with public authorities and manufacturers.
Internationalization was on Walgreens' agenda for years, but was delayed when the global financial crisis hit in 2008, according to Planet Retail.
"The deal with Alliance Boots, although surprising in its apparent suddenness and breathtaking in it scale, is not entirely unexpected," said Planet Retail research director Matthew Stych. "The drug store sector in the U.S. is becoming relatively saturated in terms of opportunities to lay down new stores."
Walgreens has gained access to emerging markets such as Thailand, "a small but promising operation in southern China" and an expanding Middle Eastern franchise business, Stych added.
Overall, Alliance Boots has pharmacy, health and beauty retail businesses in 11 nations and operates over 3,330 health and beauty retail stores, most with pharmacies. Its pharmaceutical distribution businesses supply medicines, other health care products and related services to more than 170,000 pharmacies, doctors, health centers and hospitals from over 370 distribution centers in 21 countries.
"This deal represent a once-in-a-lifetime brand and asset opportunity," Walgreens president and chief executive officer Greg Wasson said in a webcast, Q&A-style investor meeting just days after the blockbuster deal was announced in late June. "I believe what our shareholders want us to do is position ourselves for the next 10 to 20 years, and this is the brand and asset to do it with."
Together, Walgreens and Alliance Boots would be the world's biggest purchaser of prescription drugs and a host of other health-related products.
"We saw this as an opportunity to strengthen our core business and grow outside the U.S. and in emerging markets," Wasson said during the webcast event.
Under the proposed deal, Walgreens plans to buy a 45% stake in Boots for $6.7 billion in cash and stock, with the option to buy the other 55% of the company in about three years for $9.5 billion in cash and stock. Pending approvals, Walgreens' initial investment is slated to close by Sept. 1.