Boots exec sees Walgreen tie-up fueling sector M&A

Speaking on Friday at a quickly organized investor conference to further explain the merits of the deal that was announced on Tuesday, Stefano Pessina said that Walgreen and Alliance BOOTS (BOOT.LO)will have "a couple of years" head start on other players as rivals seek their own deals.

Walgreen, the biggest U.S. drugstore chain, is initially taking a 45 percent stake in Alliance Boots for $6.7 billion in cash and stock, creating the world's biggest buyer of prescription drugs and giving both companies reach into new markets.

Walgreen plans to buy the rest in 3 years, paying $4.9 billion in cash, issuing 144.3 million shares for the remaining equity and assuming Alliance Boots' debt.

"This move will trigger a number of mergers" elsewhere in the industry as large players look to expand into new markets, particularly emerging markets like China, and widen their product offerings in drugstores, Pessina said.

The combined company would also look at making acquisitions of wholesalers and retailers in new markets, Pessina said.

But the companies respective positions in their home markets gives them a big advantage, executives said.

"I don't know that there other brands out there that can be brought together (like these two can)," Walgreen Chief Executive Greg Wasson told investors.

Analysts have questioned the deal's pricetag and Walgreen's decision to make a bet on a European company given the euro zone's debt crisis. Walgreen shares hit a yearly low on Wednesday.

Walgreen shares were up 2.9 percent to $29.99 in early afternoon trading on Friday.

(Reporting By Phil Wahba; Editing by Tim Dobbyn)

WhatsAppFacebookTwitterLinkedinBeloudBluesky