Wary of stiff competition from CVS Health Corp NYSE: CVS and Amazon.com, Inc. (NASDAQ:AMZN) entry, Walgreens Boots Alliance Inc. (NASDAQ:WBA) has decided to exit the wholesale pharmacy business. The giant drugstore has reached an agreement to offload its majority stake in the pharmacy wholesale unit.
Walgreen’s Divestment
The company has reached an agreement to sell the unit to AmerisourceBergen Corp as part of a $6.5 billion transaction. AmerisourceBergen is to acquire a big chunk of Walgreens Alliance Healthcare unit which specializes in the sale of medicines and other products to pharmacies, hospitals mostly in Europe. The sale excludes Walgreens operations in China, Italy, and Germany.
The acquisition paves the way for AmerisourceBergen to strengthen its global reach. The deal comes just days after the company bolstered its earnings forecast for the fiscal 2021 that ends in September. The company is projecting earnings of between $8.25 and $8.50 a share.
In addition, Walgreens has extended its existing distribution agreement with AmerisourceBergen. The extension further strengthens the two company’s ties as Walgreen’s is AmerisourceBergen's biggest shareholder with a 30% stake.
Under the terms of the agreement, AmerisourceBergen is to pay $6.3 billion in cash for the units. It will also offer two million shares of its shares to Walgreens. Walgreens expects the sale to allow it to focus more on the retail side of the business by focusing on pharmacies in its store in addition to expanding its health offerings.
Healthcare Consolidation
Last year, Walgreens reached an agreement to invest and work with VillageMD. With the deal, the company is poised to open hundreds of clinics with primary health care doctors at most of its sites across the U.S.
Drug chains ate increasingly investing in health care services seen as reliable supply chains for drugs. CVS Corp has already reached an agreement to acquire Aetna as part of a plan that seeks to bolster the healthcare services unit.
The healthcare industry continues to experience a wave of consolidation with UnitedHealth Group announcing the purchase of Change Healthcare Inc. As part of an $8 billion transaction.