Salem Radio Network News Wednesday, May 23, 2018


Walgreens bid for AmerisourceBergen would be a head-scratcher: analysts

By Ankur Banerjee

(Reuters) – Walgreens’ potential move to buy a drug distributor in which it already has a 26 percent stake has some analysts questioning the logic and wondering if it would be enough to compete in an evolving U.S. healthcare sector.

Analysts said any deal would not be a surprise, but might cost Walgreens opportunities down the line as the company tries to keep pace with rival CVS Health Corp, which is set to buy health insurer Aetna Inc, and an impending threat from

Walgreens Boots Alliance Inc, the largest U.S. drugstore operator, has made a takeover approach to AmerisourceBergen Corp, the Wall Street Journal reported on Monday, but said the talks were in early stages.

AmerisourceBergen shares were up 12 percent in early trading, while Walgreens shares were up 1.4 percent. Shares of drug distributors Mckesson Corp and Cardinal Health were lower.

“This purported deal wouldn’t be shocking … but we’re currently struggling to see the strategic allure of the combination for Walgreens,” Baird analyst Eric Coldwell said in a note.

The two companies are already closely allied, having struck a 10-year deal in 2013 for AmerisourceBergen to buy drugs for Walgreens, which subsequently acquired 26 percent of the distributor.

The rationale for such a deal is a bit of a head-scratcher as Walgreens and AmerisourceBergen already have a joint venture that affords both the strategic value that combining would provide, Jefferies analyst Brian Tanquilut said.

The news comes as the U.S. healthcare landscape remains in a state of flux, with changes to the U.S. Affordable Care Act escalating drug prices and Amazon’s possible entry.

Walgreens has highlighted that it tends to prefer partnerships, which analysts say could eventually turn into acquisitions.

A deal, however, would give Walgreens a bigger presence in the specialty pharmacy space, where it does not have adequate exposure, setting it up to compete better against CVS and pharmacy benefit manager Express Scripts Holding Co.

“As the broader healthcare sector focuses more on moving specialty drug administration out of facility-based (hospital/physician’s office) settings, gaining a strong foothold in specialty through ABC could be a valuable strategic move,” Tanquilut said.

(Reporting by Ankur Banerjee in Bengaluru; Editing by Sayantani Ghosh)

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