AddThis

Walgreens, Alliance Boots address merger at analyst meeting

DEERFIELD, Ill. — Just a few days after announcing their merger, Walgreens and Alliance Boots leaders sat down to discuss the value of their deal before analysts on Friday.

Kicking off the Q&A-style meeting, Walgreens president and CEO Greg Wasson outlined how the drug store chain’s partnership with Alliance Boots came to fruition, noting that the opportunity was identified about 18 months ago. “Along the way ... real opportunities began to come to light, [and we learned] how we could create more value for the two companies,” Wasson told analysts.

Wasson also addressed the merger’s two-step structure, saying it was the right approach for both parties, since the plan allows the companies to capture early synergies and procurement opportunities, allows Walgreens to stay focused on its core business and allows both companies to think their strategies through. “It is a really prudent way to do it,” he said. “I don’t know if there are two other brands out there that can create the opportunity we can. [It is and will be] hard to replicate what we were able to do here.”

Alliance Boots executive chairman Stefano Pessina said the company has adapted its business to the needs of the consumers/clients to grow into a global business and noted that Alliance Boots had been interested in expanding its footprint to the United States, but needed a partner. “We didn’t think of coming to the U.S. alone. Coming alone would have been a suicide. We began to search [and found that] this company (Walgreens) is the right package,” Pessina said. “What convinced me to make the investment is the chemistry. The chemistry is very important. A part of that: We understood that this company had value. There is a clear strategy, and they are pursuing these strategies in a consistent way. I believe this strategy will drive share price.”

When asked why the companies didn’t just collaborate to achieve synergies “without cutting a check,” Wasson explained that collaborations don’t often have combined economic interests and that the overall value of Walgreens and Alliance Boots would maximize the benefits and would “make the pie far bigger versus fighting over the pie.”

”It’s difficult to leverage all of these things if we just did a partnership,” he said.

While Walgreens-Alliance Boots has a combined purchasing pool of $100 billion or more, analysts questioned how the deal has a lot of integration risk with a 45% stake by Walgreens in the U.K. retailer, which currently has debt. The executives — which included Walgreens EVP and CFO Wade Miquelon, along with Alliance Boots group finance director George Fairweather — would not argue with the math, but affirmed that the merger set them up to have “competitive advantage for a very long time” and that the “one-in-a-lifetime brand asset” sets the companies up for expansion and diversification growth for the next 10 to 20 years.

Alliance Boots, which credits its success in various markets by hiring local management to operate its stores, is bringing that same notion to its deal with Walgreens. Both Fairweather and Miquelon are working together to bring together a structure that will create a roadmap for these synergies, including generic and branded drug buying, front-end sales and private label, and research and development for new products and innovations.

As previously reported, the two companies together will be:

  • The global leader in pharmacy-led, health and well-being retail, with more than 11,000 stores in 12 countries;

  • The largest global pharmaceutical wholesale and distribution network with more than 370 distribution centers delivering to more than 170,000 pharmacies, doctors, health centers and hospitals in 21 countries; and

  • The world’s largest purchaser of prescription drugs and many other health and well-being products.

Boots attempted to enter the

Boots attempted to enter the Canadian market about 30 years ago, couldn't make and went home. Let's see what happens this time.

© 2014 Drug Store News. All Rights Reserved.