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Walgreens and AmerisourceBergen End Talks without a Deal

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As of now, there’s no partnership between Walgreens and AmerisourceBergen

According to a recent report by CNBC, talks between Walgreens Boots Alliance (WBA) and AmerisourceBergen Corp. (ABC) ended without an agreement. The two companies were reportedly discussing a potential partnership where Walgreens would acquire the remaining stake of AmerisourceBergen, which it doesn’t already own. Walgreens owns a 26.0% stake in the company.

Walgreens and ABC stock fell after the report on February 27, 2018. WBA and ABC closed the day’s trading with losses of 2.0% and 2.9%, respectively.

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The Wall Street Journal had reported on February 12, that “Representatives of Walgreens Chief Executive Stefano Pessina reached out several weeks ago to representatives of Amerisource CEO Steven Collis, according to people familiar with the matter. They discussed the possibility of Walgreens buying the portion of Amerisource it doesn’t already own, though there isn’t an offer on the table, the people said.”

Neither Walgreens nor AmerisourceBergen commented on the rumors.

Discussing the recent partnerships in the drugstore industry

Had the talks between Walgreens and AmerisourceBergen concluded successfully, the resulting deal would have been valued somewhere around $25.0 billion, given ABC has a market capitalization of ~$22.0 billion. It would vertically integrate Walgreens’ business, thereby boosting its margins.

This would have been the third deal in the drugstore industry over the last three months. The top pharmacy chain, CVS Health, acquired insurer Aetna (AET) in a $69.0 billion deal in December 2017. The transaction was one of the largest for the year and one of the most significant in CVS Health’s history.

The Rite Aid-Albertsons deal followed, in which Rite Aid (RAD) and privately held Albertsons Companies announced their intention to merge. The transaction includes those assets of Rite Aid that were not already sold to Walgreens. Walgreens acquired 1,932 Rite Aid stores and its three distribution facilities in September 2017.

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