UPDATE 2-Amerisource signs distribution, equity deal with Walgreen
March 19 (Reuters) - Drug distributor AmerisourceBergen signed a 10-year distribution deal with Walgreen Co and partner Alliance Boots that it said would deliver $28 billion in incremental revenue in fiscal 2014 and give the pharmacy chains the right to acquire up to 23 percent of the company.
The contract with the biggest U.S. and European drug retailers includes the distribution of branded, generic and specialty drugs to retail stores, mail order and specialty pharmacies and will give Amerisource a bigger global reach.
"The new agreements are expected to be meaningfully accretive to AmerisourceBergen's earnings and strengthen its confidence in delivering solid and sustainable long-term EPS growth," the company said in a statement on Tuesday.
Walgreen and Alliance Boots together have been granted the right to buy up to 7 percent of Amerisource's equity in the open market. In addition, Amerisource granted Walgreen and Alliance Boots warrants exercisable for 16 percent equity in Amerisource.
Amerisource has a market capitalization of about $11 billion. If the pharmacy chains fully exercise their rights, they will together be the biggest shareholder in Amerisource, based on current shareholdings.
Walgreen has a 45 percent stake in Alliance Boots and an option to acquire the remaining 55 percent by August 2015.
Walgreen and Alliance Boots will acquire two board seats at Amerisource once the equity arrangements are exercised.
Amerisource said the deal, effective Sept. 1, was expected to contribute about 20 cents in earnings per share in fiscal 2014 ending September.
Amerisource said it now expected earnings of $2.96 to $3.06 per share from continuing operations in fiscal 2013 ending September, down from its previous forecast of $3.06 to $3.16.
The company said it expects incremental brand revenue of at least $2 billion in September and raised its revenue growth forecast to 8-11 percent for the fiscal year.
It had previously forecast revenue growth of 6-9 percent. Amerisource had revenue of $79.49 billion in fiscal 2012.
Amerisource said it expects free cash flow for fiscal 2013 to decrease to $100-$200 million as it takes on the new business. The company previously expected cash flow of $750 million to $850 million.
Amerisource shares were up 6.6 percent in light premarket trading at $51.50. Walgreen shares were up 1.3 percent at $43, also in thin trading.
Separately, Walgreen reported better-than-expected second-quarter earnings, helped by improved gross margins primarily due to an increase in sales of generic prescription drugs.