Walgreen share price up, shareholders approve $15.3 billion deal

Walgreen Co. announced on Monday that after a special meeting shareholders gave the green light to the deal with Alliance Boots GmbH and the following switch to a holding company structure.

Under the deal Walgreen, the largest US drugstore chain by revenue, will acquire the remaining 55% of Alliance Boots which it doesnt already own. The company operates Europes pharmaceuticals distributor Alliance and the UK chemistry specialist Boots.

Currently Walgreen operates 8 200 locations within the US and the deal would boosts its reach to more than 10 countries with over 11 000 locations. The agreement has been approved by regulators and shareholders from both companies, reorganization and the acquisition are expected to be completed on Wednesday.

The combined entity will be named Walgreens Boots Alliance Inc and will be headquartered in the Chicago area, dispelling speculations that the company was aiming at one of the so called “inversion” deals. However, the company will miss out on reducing it tax bill by a third from moving its head base. Shareholders have expressed their disappointment in such actions, which would also attract the attention of US regulators. Meanwhile Boots will not change its Nottingham headquarters.

However, the newly created company would benefit from becoming the largest buyer of prescription drugs in the world as it will give it more negotiation power when discussing deals with drug suppliers. The move will improve performance as it has been hurt by lower drug-reimbursement rates and higher costs for generic drugs.

Under the deal Walgreen, which purchased the initial 45% stake in Alliance Boots for $6.7 billion in June 2012, will become a wholly owned subsidiary of Walgreens Boots Alliance and its shares will have a 1:1 exchange ratio. The new company will be listed on New York’s Nasdaq market.

Walgreens CEO Greg Wasson, who has been at the helm since 2009, will step down once the deal closes, and be succeeded, on an interim basis, by Alliance Boots’ Executive Chairman Stefano Pessina, who became the largest shareholder in Walgreen during the acquisition.

For the first quarter ended November 30, Walgreen stated a 6.7% increase in sales to $19.6 billion, boosted by a company record of 222 million filed prescriptions, or 4.3% more compared to a year earlier.

Walgreen Co gained 0.43% on Monday and closed at $76.79 in New York, marking a one-year increase of 33.71%. The company is valued at $72.67 billion. According to the Financial Times, the 19 analysts offering 12-month price targets for Walgreen have a median target of $77.00, with a high estimate of $88.00 and a low estimate of $58.00. The median estimate represents a 0.27% increase from the last price of $76.79.