Walgreen prepares to buy British pharmacy retailer Alliance Boots in a $17.6 bn deal

Walgreen Co, the largest drug retailing chain in the US, could be planning a raid on Alliance Boots in a deal that values the British pharmacy retailer at £10.5 billion ($17.6 billion), the Daily Mail yesterday reported.

The news comes on the same day when AstraZeneca, Britain's second-largest drug company, rejected a $118.8 billion takeover offer from US drug giant Pfizer. (See: AstraZeneca rejects Pfizer's third takeover offer)

Walgreens, which already holds a 45-per cent stake in Alliance Boots, could be looking to take full control of the Zug, Switzerland-based company in February in order to use Alliance Boots' base in the UK to save on high taxes, the report said.

Britain has recently reduced its corporate taxes to 21 per cent from 26 per cent in 2011 and will further reduce it to 20 per cent in April 2015. This is one of the main reasons Pfizer was keen on buying AstraZeneca.

In June last year, Walgreen acquired a 45-per cent stake in Alliance Boots in a $6.7 billion cash and stock deal.

Deerfield, Illinois-based Walgreen initially invested about $4 billion in cash and 83.4 million shares for the stake.

Under the deal, Walgreen would have the option to acquire the remaining stake by February 2015 for around $9.5 billion based on Walgreen's current share price and exchange rate.

Alliance Boots was formed through the 2006 merger between British high street pharmacist Boots Group and pan-European wholesale and retail pharmacy group Alliance UniChem.

Alliance Boots was initially listed on the London Stock Exchange until it was taken private in 2007 by private equity firm KKR and Italian billionaire Stefano Pessina for £12.4 billion, in what was then Europe's biggest leveraged buyout.

Alliance Boots operates in more than 25 countries and employs more than 116,000 people. The company has more than 3,330 health and beauty retail stores, around 625 optical practices, and its pharmaceutical wholesale businesses supply medicines, other health-care products and related services.

For the financial year 2011, Alliance Boots posted operating profit of £1.5 million ($2.4 billion) on revenues of £25.4 billion ($39.4 billion).

Walgreens generated sales of $72 billion in fiscal 2011 through its 7,890 stores across the US.

Walgreens pharmacy services include retail, specialty, infusion, medical facility and mail service, along with respiratory services.

The company's subsidiary Take Care Health Systems is the largest manager of worksite health and wellness centres and in-store convenient care clinics, with more than 700 locations throughout the country.