Walgreens Boots Alliance Inc. said it agreed to sell the majority of its pharmacy wholesale unit to AmerisourceBergen Corp. to focus on its retail pharmacies and health initiatives as it faces fresh competition from Amazon.com Inc. and longtime rival CVS Health Corp.
AmerisourceBergen, a distributor of health-care products, will pay $6.5 billion for most of Walgreens's Alliance Healthcare unit, which sells medicines and other products to pharmacies, hospitals and other facilities, mainly in Europe. The deal calls for AmerisourceBergen to pay about $6.3 billion in cash for the assets and two million of its shares, the companies said Wednesday.
Walgreens said the sale would allow it to better concentrate on pharmacies in its stores and on expanding health offerings. Last year, the company said it struck a deal to invest in and work with VillageMD to open hundreds of clinics with primary-care doctors at Walgreens sites across the U.S. over the next five years.
CVS has also pushed to bulk up its health-care services, buying insurer Aetna and developing health hubs for its stores . The company doesn't have a wholesale operation but instead focuses on managing pharmacy benefits, running retail stores and providing health insurance.
Both chains are seeking to give patients more reasons to visit their locations as Amazon pushes into the prescription-drug business. The e-commerce giant launched an online pharmacy in November .
In its latest quarter, Walgreens generated $6 billion in sales from its wholesale unit consisting of Alliance Healthcare and a stake it owns in AmerisourceBergen. The Alliance unit distributed health-care products and services to more than 115,000 pharmacies, hospitals and other health providers annually as of the end of last August, Walgreens said in a filing. It was operating then in 11 countries, most in Europe, the filing says.
AmerisourceBergen is acquiring operations in 13 countries, mostly in Europe, executives said on a call about the deal. Walgreens's operations in Germany, Italy and China aren't included in the transaction, AmerisourceBergen executives said. Based in Chesterbrook, Pa., AmerisourceBergen supplies prescription medicines, home-health items and other products and services to health-care providers.
Walgreens's move to exit most of its wholesale business comes as it works to hire a new chief executive to replace its current leader, Stefano Pessina, who plans to step down but is remaining in the job as the company conducts a search. The company has also faced challenges related to the coronavirus pandemic. The crisis reduced customer traffic and prescription demand last year in the U.K., where the company operates the Boots U.K. chain. The British government this week ordered a new lockdown until mid-February as a highly contagious new strain of the virus drives up infections and hospitalizations.
However, U.S. sales in the latest quarter for Wallgreens's U.S. retail-pharmacy unit were up roughly 4% to $27 billion. Walgreens is scheduled to release quarterly results Thursday.
Walgreens and AmerisourceBergen also said Wednesday that they extended a distribution agreement for the U.S. by three years until 2029. The Alliance Healthcare U.K. branch will continue to distribute products to Walgreens's Boots business until 2031, the companies said.