Walgreen Seeks to Reassure Investors About Alliance Boots Deal

In response to what some see as a potentially risky move in Deerfield-based Walgreen Co.’s attempts to acquire Alliance Boots GmbH, a European pharmacy and health-and-beauty retailer, Walgreen’s executives gathered investors together to reassure them of the company’s intentions. The Chicago Tribune story reports that Walgreen executives agreed to take a 45% stake in Alliance Boots in exchange for $6.7 billion in cash and stock. Furthermore, Walgreen would have the option of purchasing the remainder of Alliance Boots over the next three years at an additional cost of $9.5 billion and assume the company’s debt, which is estimated at $11 billion.

Some investors, as well as various analysts, however, had the opinion that this substantial amount of cash would be best used for share repurchases. Concerns also arose in a significant investment in a European company during a time of clear economic distress both at home and abroad. Likewise, analysts forecast that the impact of taking on such debt is bound to have an extremely negative effect on Walgreen’s credit profile.Walgreen Seeks to Reassure Investors About Alliance Boots Deal

In response, Walgreen executives defended their decision by characterizing the acquisition deal as a once-in-a-lifetime opportunity to dominate the retail pharmacy industry on a global basis. By combining forces now, they argued, they have a head start on their competitors who might seek similar mergers in the future. They also cited long-term benefits for Walgreen, the nation’s largest pharmacy chain, such as a $150 million cost savings in the first year of the deal and up to $1 billion in the next four years and placing them in a better position to expand into new markets such as China and Latin America.

This proposed transaction is a good example of a complex merger and acquisition negotiation process that must balance the concerns of investors with the needs to globalize an industry leader in a weak economy. In order to successfully accomplish such a feat, all companies involved need the services of accomplished business attorneys. Contact your Oak Brook, Illinois business lawyer today for assistance.