Boots and Walgreens merger to create procurement benefits

20 June 2012

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20 June 2012 | Kamalpreet Badasha

The merger between the UK retailer Alliance Boots and its US counterpart Walgreens will create a company with “unmatched supply chain and procurement expertise”.

The US pharmacy chain is acquiring a 45 per cent stake in the UK business, investing $6.7 billion (£4.26 billion), made up of $4 billion (£2.54 billion) in cash and 83.4 million shares. The companies said the deal would create the world’s biggest purchaser of prescription drugs.

Walgreens expects the deal to result in savings of between $100 to $150 million (£63.6 million to £95.4 million) in the first year, and $1 billion (£636.3 million) by the end of 2016 for both companies. The savings will include procurement as both organisations combine spending power for prescription drugs, over-the-counter medicines, front-of-store purchasing and indirect spend for more than 11,000 stores worldwide.

The combined global wholesale and distribution network will consist of more than 370 distribution centres delivering to more than 170,000 pharmacies, doctors and hospitals across 12 countries.

The deal is to be completed by September 2012, subject to regulatory approval. There will be no expected job cuts. The board of directors for both firms will work across both organisations. Walgreens will also have the option of acquiring the remaining 55 per cent of Alliance Boots in approximately three years’ time.

"We are bringing together the strengths and expertise of each company to create a worldwide healthcare platform for the future that can provide innovative ways to address global health and wellness challenges,” said Gregory Wasson, president and CEO of Walgreens.

Stefano Pessina, executive chairman of Alliance Boots, added: “We believe that it will bring clear benefits to all stakeholders, creating significant and sustainable industrial value through synergies and the deployment of our joint expertise. Our pharmaceutical wholesale businesses will provide their logistics know-how to Walgreens and are well placed to be one of the growth engines of the new enterprise.”

In April, Walgreens hired former OfficeMax supply chain chief Reuben Slone as senior vice president of supply chain management.


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