AmerisourceBergen Corporation (NYSE:ABC) (AmerisourceBergen) signed a purchase agreement to acquire majority of Alliance Healthcare businesses from Walgreens Boots Alliance, Inc. (NasdaqGS:WBA) for $6.5 billion on January 6, 2021. Under the terms of the purchase agreement, AmerisourceBergen will pay Walgreens $6.275 billion in cash and deliver 2 million shares of AmerisourceBergen common stock at closing of the transaction. The cash portion is subject to a customary working capital and net-debt adjustment. As of August 4, 2021, the net cash payment was $5.5367 billion, as AmerisourceBergen acquired $922 million of cash and cash equivalents and $143.3 million of restricted cash. AmerisourceBergen also paid $118.2 million of estimated accrued consideration, and $6.1 million of other equity consideration for the acquisition. AmerisourceBergen expects to fund the cash purchase price through a combination of cash on hand and new debt financing. Approximately half of the consideration is expected to be funded by cash on hand. Fully committed financing for the transaction has been provided by JPMorgan Chase Bank, N.A. AmerisourceBergen will raise $1.525 billion through notes offering to finance a portion of the acquisition. The transaction will comprise of European / ex-US pharmaceutical distribution business of Walgreens. Walgreens' operations in China, Italy and Germany are not part of this transaction. The majority of Alliance Healthcare businesses had revenues of $19 billion and operating income of $319 million in fiscal year ended September 30, 2020. The key employees, including leadership team of Alliance Healthcare is expected to be retained. AmerisourceBergen and Walgreens have agreed to strengthen their strategic partnership by extending and expanding their commercial agreements. US distribution agreement will be extended by three years until 2029 and Alliance Healthcare UK will remain the distribution partner of Walgreens until 2031. Also in connection with entering into the Share Purchase Agreement, the parties agreed that on or prior to the closing date, they will enter into an Amended and Restated Shareholders Agreement, which will amend and restate in its entirety the Shareholders Agreement and, among other things, increase by 1% the percentage of outstanding shares of AmerisourceBergen common stock which Walgreens Boots Alliance and its affiliates are permitted to hold.

The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals, any applicable waiting period, AmerisourceBergen stock consideration shall have been approved for listing on the NYSE, subject to official notice of issuance and execution of any ancillary agreements. The transaction has been approved by the Boards of Directors of AmerisourceBergen and Walgreens. The European Commission (EC) on April 30, 2021, gave an unconditional nod to agreement to acquire the majority of Alliance Healthcare. The transaction is expected to close by AmerisourceBergen's fiscal year-end 2021 (September 2021). Walgreens Boots Alliance will employ proceeds to reduce debt and accelerate development of healthcare services. The transaction is expected to deliver high-teens percentage accretion to AmerisourceBergen's adjusted diluted EPS in the first fiscal year. AmerisourceBergen expects synergies from the acquisition of Alliance Healthcare to ramp to an annual run-rate of $75 million in the fourth year. Adjusted free cash flow of the combined AmerisourceBergen and Alliance Healthcare businesses are expected to increase 125% of AmerisourceBergen's stand-alone estimates. AmerisourceBergen expects to maintain its strong investment grade credit rating and the positive contribution to cash generation will support debt reduction in the years following transaction close. This acquisition is expected to have no impact on AmerisourceBergen's dividend policy. The transaction will be slightly dilutive in the current financial year for Walgreens but will be accretive longer-term.

J.P. Morgan Securities LLC acted as the financial advisor and Damien R. Zoubek, Brittain A. Rogers, Andrew J. Pitts, Stephen M. Kessing, Sarah F. Rosen, Lauren Angelilli, J. Leonard Teti II, Kiran Sheffrin, Christine A. Varney, David J. Kappos, Anthony N. Magistrale, Matthew J. Bobby, Joyce Law, Brian M. Budnick, Paul A. Bryant, Gary R. Uter and O. Keith Hallam of Cravath, Swaine & Moore LLP, Daniel Simons, Peter Watts, Ed Fishman, Suyong Kim of Hogan Lovells International LLP and Colby Smith, Jim McKenzie, Bart Bassett, and Vito Petretti of Morgan, Lewis & Bockius LLP acted as the legal advisors for AmerisourceBergen. Centerview Partners acted as the financial advisor and Christopher E. Austin, Brian Byrne, Daniel Ilan, Kathleen Emberger, James Corsiglia, Corey Goodman, Nicholas Levy, Richard Sultman, Nicolás Grabar, Jerome Hartemann, Gianluca Russo, Duane McLaughlin, Jennifer Maskell, Chase Kaniecki, Beau Sterling and Matthew P. Salerno of Cleary Gottlieb Steen & Hamilton LLP and Helen Bradley, Jo Hewitt, Duncan Reid-Thomas and Paul Harrison of Baker McKenzie LLP, McDermott Will & Emery LLP acted as the legal advisors for Walgreens. Andrew L. Bab of Debevoise & Plimpton LLP acted as legal advisor to J.P. Morgan Securities LLC in the transaction. Daniel E. Wolf and Edward J. Lee of Kirkland & Ellis LLP acted as legal advisor to Centerview Partners LLC. James A. Florack, Darren Mahone, Michael Farber and Adam Kaminsky of Davis Polk advised the joint lead arrangers and the agent in connection with a $1 billion term loan facility provided to AmerisourceBergen Corporation to finance its acquisition of Walgreens Boots Alliance, Inc.'s Alliance Healthcare business, and a $1 billion revolving credit facility provided to AmerisourceBergen for general corporate purposes.