Private equity firm KKR, which teamed up with Alliance Boots’ then executive deputy chairman Stefano Pessina to buy the company for £11.1bn in 2007, is selling the stake for $6.7bn (£4.3bn) in cash and shares.
It has also agreed an option that could see Walgreens take full ownership of the business in three years’ time by paying a further $9.5bn in cash and shares and taking on the group’s debt, which stood at just over £7bn at the end of its last financial year.
The partnership will create a business with 11,000 stores in 12 countries, and 370 distribution centres delivering to more than 170,000 pharmacies, doctors’ surgeries, health centres and hospitals in 21 countries.
Walgreens chief executive Gregory Wasson said: “We are bringing together the strengths and expertise of each company to create a worldwide healthcare platform for the future that can provide innovative ways to address global health and wellness challenges.”
Alliance Boots said it was committed to keeping its current support offices across Europe, including its Nottingham hub.
Alex Gourlay, chief executive of the group’s health and beauty division, said its existing relationship with US retailer Target – which generates annual sales of about $100m for Boots brands including Botanics and No7 – will continue.
Gourlay told The Scotsman: “We’ve invested £1bn in the brand over the past five years, and we’ll continue that level of spend going forward. The Walgreens team liked what they saw in Boots, so the brand is secure.”
He said there are no plans to cut jobs following the deal, because there are no geographical overlaps between the two companies, which together employ more than 360,000 people.
Pessina, currently executive chairman at the firm, will take an 8 per cent stake in Walgreens. He said the deal would bring “clear benefits” to both companies and their shareholders.
It is estimated that the combined business will be able to reduce its costs by up to $150m in the first year thanks to shared buying of prescription drugs and the expansion of Alliance Boots’ brands into Walgreens stores.
Pessina, who will join the board of the US company, added: “The fit is natural. Walgreens’ consumer profile in the US is similar to Boots’ in the UK in many ways – a trusted and much-loved pharmacy brand with a strong heritage.”
KKR, which invested £1.22bn in Alliance Boots in 2007, said it will receive £1.2bn in cash and £140m in Walgreens shares for its stake in the business.
Dominic Murphy, who leads the private equity firm’s activities in the UK, will also join the US group’s board.
He said: “Following five years of successful performance, both in the UK and overseas, the company is now in a better position than ever before.”
It also emerged yesterday that Andy Hornby, the former HBOS chief executive who resigned as boss of Alliance Boots last year, has been appointed non-executive chairman of Leeds-based Pharmacy2U, which allows customers to order their prescriptions online.
Hornby, who was at the helm of HBOS when it had to be rescued by Lloyds in 2008, is also chief executive of bookmaker Coral.