By Sarfaraz A. Khan and Gohar Yousuf
The leading U.S. drugstore chain operator Walgreen (WAG) has partnered with the European giant Alliance Boots and AmerisourceBergen Corp. (ABC), one of the world’s largest pharmaceutical service companies, to expand its wings outside of North America as it aims to become the biggest drug store chain on both sides of the Atlantic. More recently, Walgreen has also acquired some of Kerr Drugs’ assets. Through mergers and partnerships, Walgreen seeks to considerably grow its top and bottom line, while exercising strict cost discipline, which would improve its margins. The positive impact of these mergers was evident in the recent quarterly results. So far this year, the company’s shares have outperformed the broader market and due to its bright outlook, Walgreen’s shares could continue to move higher in the coming quarters.
Its strategic partnership with Alliance Boots continues to pay-off as Walgreen achieved $154 million in the combined synergies in the fiscal year, which is $4 million above the high end of its estimate. Walgreen has signed a 10-year contract with AmerisourceBergen and its full worth over a decade is around $400 billion. This partnership has given birth to the biggest buyer of generic drugs in the world. Earlier in September, AmerisourceBergen officially announced that it will distribute pharmaceuticals to more than 8100 Walgreen stores while the three (AmerisourceBergen, Walgreen and Alliance Boots) would collaborate with each other on the global supply chain. Naturally, AmerisourceBergen would become the primary supplier of generics to Walgreen.
In September, Walgreen also purchased some of ... read full article at GuruFocus