Walgreens Moves To Take Over AmerisourceBergen

Walgreens Boots Alliance Inc. is making a move on drug distributor AmerisourceBergen Corp.  The move is undertaken as the U.S. drugstore landscape is becoming an increasingly fraught battleground.

According to Wall Street Journal reports, Walgreens Chief Executive Stefano Pessina reached out to AmerisourceBergen CEO Steven Collis to discuss the potential outcome where Walgreens purchases the part of Amerisource it doesn’t already own.

There is, as of yet, no official deal on the table, according to both firms — the conversation about combination is still in its earliest phases.

As of today, Walgreens owns just over a quarter of AmericsourceBergen and has a rep on the firm’s board.  The Valley Forge, Pennsylvania-based firm is one of the largest distributors of pharmaceuticals in the United States, turning a profit of $364.5 million on $153.1 billion in revenue in its fiscal year ending Sept. 30.

Amerisource — apart from its business supplying retail pharmacies — also runs a specialty business that deals mainly with the distribution of expensive medicines for cancer and other diseases directly to physicians and oncology clinics. The firm also runs patient-services hubs for pharmaceutical companies to help patients navigate the often tricky world of reimbursement hurdles with insurers.

Walgreens is the world’s largest drugstore chain and operates more than 13,000 locations in 11 countries. Under its umbrella are the eponymous Walgreens as well as Duane Reade, Boots and beauty brands such as No7 and Soap & Glory.  It is one of the world’s largest purchasers of prescription drugs, and derives about 18 percent of its sales from its pharmaceutical-wholesale business.

Walgreens is AmerisourceBergen’s largest customer — the drug store chain’s  purchases alone were 3o percent of its revenue last year.

The move to vertical integration on Walgreens’ part comes as it is trying to shore itself up against a very rapidly shifting pharmacy business.  Walgreens rival CVS Health Corp. signed a $69 billion deal to buy health insurer Aetna Inc. Amazon has hinted of late that it might be entering both the pharmacy and health insurance business.

But Walgreens is used to growing with the times, as CEO Stefano Pessina has worked hard to grown the brand from a small family-owned chain of drugstores to an international retail powerhouse.  In 2012, Walgreens shelled out $6.7 billion to buy nearly half of Alliance Boots. In 2014, it bought the rest. Mr. Pessina, executive chairman of Alliance Boots, became CEO of the combined company.

From there, Pessina made a deal to buy  Rite Aid Corp. for $9.4 billion in 2015. Regulators had some issues with the deal, which had to be recut so that Walgreens would buy fewer Rite Aid stores.