Walgreen Co. will pay $6.7 billion in cash and stock to buy a stake in European health and beauty retailer Alliance Boots, a deal that would give global clout to a U.S. drugstore chain struggling with slipping sales in its home market.
The combination would create the largest single purchaser of prescription drugs in the world and give Walgreen access to emerging markets like China and Egypt, company officials said Tuesday in announcing the deal. However, it also will plant the biggest U.S. drugstore chain in a continent beset by debt worries in Greece, Spain and other nations.
But Walgreen said Alliance Boots brings in revenue from some of the most stable countries in Europe. CEO Greg Wasson told analysts the acquisition is "a truly game-changing step" for his Deerfield, Ill., company.
"We think the opportunities both in the U.S. and across the globe are really powerful," he said.
Investors weren't so sure about the deal. Walgreen shares slid nearly 6 percent Tuesday, or $1.87, to close at $30.09, while the Standard & Poor's 500 index rose slightly.
Walgreen plans to initially spend about $4 billion in cash and contribute more than 83 million shares for a 45 percent ownership stake in Switzerland-based Alliance Boots, which runs more than 3,300 health and beauty retail stores in 11 countries.
Walgreen then has an option to buy the rest of the company in about three years in a deal valued at around $9.5 billion based on Walgreen's share price and the current exchange rate.
The privately held Alliance Boots runs the largest drugstore chain in the United Kingdom, where the company brought in $10.5 billion in revenue during the fiscal year that ended March 31, according to its website. It has more than 2,400 health and beauty stores there, most of which include a pharmacy.
Alliance Boots also supplies health care providers in 21 countries, including China.