Inside This Issue - News
Platform for growth
February 25th, 2013
LONDON – The leaders of Walgreen Co. and Alliance Boots PLC envision a combined company that, by 2016, has: annual sales of $130 billion or more, adjusted operating income of between $9 billion and $9.5 billion, savings from synergies totaling $1 billion, and an operating cash flow of $8 billion or more.
Walgreens president and chief executive officer Greg Wasson outlined this vision in a presentation to analysts here earlier this month.
"This combination accelerates our core strategies, creates an unmatched global supply chain and provides a platform for global expansion beyond the U.S. and Europe into new markets around the world," Wasson said.
Alliance Boots executive chairman Stefano Pessina, whose company hosted the two-day analyst meeting, echoed the idea that real opportunity ahead lies not in cutting costs, but in expanding sales and being positioned to take advantage of a shifting market for health care services.
"Commentators sometimes take synergies as the measure of success," Pessina said. "But a deal like this is all about building a platform for growth, far beyond exploiting the synergies."
He added: "The Alliance Boots financial track record, growth strategy and unique portfolio of businesses across many countries position us well to take full advantage of opportunities in the changing health care markets. We believe our group represents a solid investment for Walgreens, and that together we will create a successful, sustainable and profitable global player. I have full confidence in this, both as the leader of Alliance Boots and as a shareholder in Walgreens."
Wasson explained that Walgreens’ goal, through its relationship with Alliance Boots, is to transform itself into consumers’ first choice for their health and daily living needs, both in the United States and beyond.
"We are focused on creating a complete Well Experience for our customers across all of our touch points; transforming the role community pharmacy plays in health care; and establishing an unprecedented and efficient global platform through our strategic partnership with Alliance Boots," Wasson said. "As our two iconic brands come together, we will have a platform that will be very difficult, if not impossible, to replicate."
Wasson said Walgreens has made great strides in strengthening its retail pharmacy network in recent years, and it is now No. 1 or No. 2 in 161 markets, including in New York, which is the largest drug store market in the United States.
The company has strengthened its role as a provider of health care services. Walgreens is on track to provide more than 8.5 million immunizations and vaccinations this year, for example, and is expanding its reach through the Walgreen Well Network.
Walgreens did suffer sales declines in 2012 as a result of its decision to leave the Express Scripts Network. But Wasson said the result of that move was positive, positioning the company for better performance ahead.
"There’s no doubt that 2012 was a challenging year," Wasson said. "But I can absolutely say it was an important and strategic year. And we do expect many of last year’s headwinds to become this year’s tailwinds. And like any good sailor, we intend to optimize those tailwinds and not just float with those."
Alliance Boots, meanwhile, has a steady track record over the last five years of delivering double-digit profit growth and strong cash generation every year, according to Pessina, while assembling a unique portfolio of geographies combined with a unique portfolio of businesses within each geography.
"All of this can only continue — or indeed accelerate — in our partnership with Walgreens," Pessina said.