EmailWalgreens (WAG $30.50 -1.49) reported earnings of $0.62 per share, including $0.01 in costs related to strategic transaction with Alliance Boots, may not compare to the Capital IQ Consensus Estimate of $0.63; revenues fell 3.4% year/year to $17.75 bln vs the $17.95 bln consensus. Prescription sales, which accounted for 62.9 percent of sales in the quarter, decreased 6.6 percent, while prescription sales in comparable stores decreased 9.9 percent. The company filled 192 million prescriptions in the quarter, a decrease of 8.4 percent over last year's third quarter. Prescriptions filled in comparable stores decreased 9.1 percent in the quarter. Company increases quarterly dividend 22.2 percent to 27.5 cents per share, marking 37th consecutive year it has increased dividend. Walgreens will invest approxmately $6.7 billion in cash and stock (comprised of $4.0 billion in cash and 83.4 million shares) in exchange for a 45% equity ownership stake in Alliance Boots.
Walgreens will have the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in ~three years' time. The Boards of Directors of Walgreens and Alliance Boots have unanimously approved the transaction. Upon the completion of Walgreens initial investment in Alliance Boots, WAG will gain four board seats on Alliance's board (WAG execs.) The transaction is expected to be accretive to Walgreens net earnings per diluted share in the first year following completion of the initial step of the transaction, by approxmately $0.23 to $0.27, excluding one-time transaction costs. Walgreens expects combined synergies across both companies to be between $100 mln and $150 mln in the first year and $1 bln by the end of 2016. Under the terms of the agreement announced today, Walgreens will pay a total of $6.7 billion to acquire a 45% equity interest in Alliance Boots.
This payment will consist of $4.0 billion in cash and 83.4 million shares of Walgreens common stock. This is equivalent to $2.7 billion at the Walgreens closing share price of $31.96 on June 18, 2012. The owners of Alliance Boots will enter into lock-up agreements of varying lengths with respect to the Walgreens shares they will acquire in the transaction. Walgreens expects to complete its initial investment in Alliance Boots by September 1, 2012. "Together we will be ideally positioned to expand our customer offerings in our existing markets and become the health and wellbeing partner of choice in emerging markets."
