WBA makes $6 billion debt offering

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DEERFIELD, Ill. — Walgreens Boots Alliance (WBA) Inc. has announced a $6 billion debt offering to help finance its $17.2 billion deal to acquire Rite Aid Corp.

Walgreens store sign closeup_featuredWBA it expected the underwritten public offering of unsecured, unsubordinated notes to close on June 1, pending customary closing conditions. The company reported that the net proceeds will go toward funding part of the cash consideration in the Rite Aid purchase, as well as to retire a portion of Rite Aid’s debt and to pay related fees and expenses.

The offering includes $1.25 billion of 1.750% notes due 2018, $1.5 billion of 2.600% notes due 2021, $750 million of 3.100% notes due 2023, $1.9 billion of 3.450% notes due 2026 and $600 million of 4.650% notes due 2046, WBA said. The company noted that the securities are being offered in line with a shelf registration statement filed on May with the Securities and Exchange Commission.

Under the Rite Aid acquisition deal, announced Oct. 27, WBA agreed to pay more than $9 billion in cash, or $9 per share, for the drug chain and assume over $7 billion in net debt. Company executives have reiterated that they expect the transaction to close in the second half of this year, pending regulatory approval and other condition.

Fitch Ratings said it has assigned a BBB rating to WBA’s $6 billion in senior unsecured notes. The ratings firm noted that WBA is funding the acquisition with $14.6 billion of debt, including the assumption of $2.3 billion of Rite Aid’s existing unsecured debt.

“WBA has already obtained $5 billion of term loans in December 2015 and, after the issuance of $6 billion in unsecured notes, it will need to raise another $1.3 billion in financing,” Fitch reported. “WBA has disclosed that this could include bank financing, commercial paper and/or private debt placement.”

The BBB rating reflects WBA’s leading position and rising market share in the expanding drug store category, according to Fitch. “WBA’s ample free cash flow provides it the financial flexibility to strategically invest in its business and new opportunities while managing its balance sheet,” the rating agency stated. “The debt-financed Rite Aid acquisition offers WBA the ability to strengthen its competitive position and generate significant procurement and cost synergies.”



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