By Manas Mishra

(Reuters) -U.S. drug wholesaler AmerisourceBergen Corp said on Wednesday it would buy Walgreens Boots Alliance’s distribution business for $6.5 billion to expand in Europe as well as to compete better in the U.S. healthcare sector.

The deal will help Walgreens focus more on core pharmacy unit and its retail business, where sales have tanked due to the COVID-19 pandemic, resulting in a nearly 30% slump in shares in 2020.

AmerisourceBergen will get access to Alliance Healthcare, one of the largest distributors in Europe that has weathered the impact of the global health crisis.

“Both our business, and Alliance, have been resilient through COVID-19. The opportunities and awareness about drug wholesale have only expanded in the pandemic,” said AmerisourceBergen Chief Executive Officer Steven Collins.

The distribution business had generated $20 billion in 2020 sales for Walgreens, about 14% of its total revenue. The deal does not include operations in China, Italy and Germany.

AmerisourceBergen will pay the debt-laden pharmacy chain $6.27 billion in cash and deliver 2 million of its common stock at closing of the transaction. With a 30% stake, Walgreens is the largest shareholder of AmerisourceBergen.

Walgreens had in 2019 explored going private and held preliminary discussions with private equity firms, people familiar with the matter said at the time.

It has an agreement to source branded and generic drugs from AmerisourceBergen in the United States and that will be extended by three years until 2029.

The deal is expected to add to the drug distributor’s adjusted earnings per share in the high-teens percentage after it closes by the end of fiscal 2021.

Reuters reported in May last year that AmerisourceBergen had approached Walgreens to explore a deal for the company’s drug distribution business.

(Reporting by Manas Mishra in Bengaluru; Editing by Arun Koyyur)

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