Walgreen’s Names New Distribution Partner

The equity ownership part of the deal is perhaps most interesting. Under the terms revealed today, Walgreen may purchase up to 7% of AmeriSourceBergen stock on the open market. Walgreen also received warrants to purchase up to a total of 16% of the distributor’s stock. The open market purchases may begin in May 2016 at a strike price of $51.50, about 6.6% above AmeriSourceBergen’s closing price last night. The second round of purchases, amounting to 16% of AmeriSourceBergen total equity, begins in May 2017 and lasts for six months at a strike price of $52.50.

Once Walgreen accumulates a 5% stake in the company, Walgreen’s will appoint one of its executives to AmeriSourceBergen’s board. Once the full equity position is wrapped up, Alliance Boots will name a second director. The two new directors are additions, not replacements, to AmeriSourceBergen’s board. Walgreen owns 45% of Alliance Boots.

Walgreen’s shares are up about 4.4% in the early afternoon, at $44.30 in a 52-week range of $28.53 to $45.80. AmeriSourceBergen’s shares are up 5.7% at $51.07 in a 52-week range of $35.48 to $52.15.

Cardinal Health is watching its share price dive nearly 7% to $42.96 in a 52-week range of $36.91 to $47.23.