Walgreen and partner Alliance Boots said on Tuesday they signed a 10-year deal with AmerisourceBergen and will take up to a 23 percent stake in the distribution company, ending Walgreen's current contract with Cardinal Health.
The agreement with Walgreen, the largest U.S. drugstore chain, and Alliance Boots, the European health and beauty chain in which Walgreen has a 45 percent stake, will boost AmerisourceBergen's revenue by $28 billion and earnings by 20 cents per share in fiscal 2014.
Walgreen and Alliance Boots have the right to buy up to 23 percent of AmerisourceBergen as part of the deal, starting with a 7 percent stake on the open market. Amerisource granted Walgreen and Alliance Boots warrants exercisable for 16 percent equity in Amerisource.
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AmerisourceBergen shares rose 6.6 percent in light pre-market trading to $51.50. Shares in Cardinal Health, whose contract ends in August, fell 8 percent.
Cardinal Health said in a statement that it has been planning to mitigate the contract loss and is still targeting fiscal 2014 earnings from continuing operations at least similar to fiscal 2013's expected range of $3.42 to $3.50 per share. It said the contract expiration would not affect fiscal 2013 earnings.
Cardinal also has a contract with drugstore CVS Caremark that expires this year.
Shares in Walgreen were up 1.3 percent at $43. The company on Tuesday separately reported better-than-expected second-quarter earnings helped by sales of generic prescription drugs.