Walgreen sells $8 billion of bonds to buy Alliance Boots
Walgreens Boots Alliance Inc. sold $8 billion of bonds as it prepares to pay about $15.3 billion for the portion of Alliance Boots it doesn't already own.
The biggest piece of the seven-part, dollar-denominated offering was $2 billion of 10-year, 3.8 percent notes, according to data compiled by Bloomberg. Walgreen Co. (WAG) previously controlled about 45 percent of Alliance Boots, the Swiss company that runs pharmacy and beauty stores in Europe.
It will pay about $5.29 billion in cash and $10 billion in Walgreen stock for the remaining stake, the Deerfield-based company said in an Aug. 6 statement. Proceeds of the bond sale may help fund the purchase of the remainder of Alliance Boots and help refinance its borrowings, according to a regulatory filing.
The bond offering was managed by Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Wells Fargo & Co., Bloomberg data show. Moody's Investors Service rated the notes Baa2 and Standard & Poor's assigned the bonds BBB, both investment-grade rankings, according to statements from the credit graders.
"The acquisition of Alliance Boots broadens Walgreen's reach into the European region through its retail stores and wholesale operations," credit analyst Mariola Borysiak said in S&P's note.
The company also plans to enter into a $3 billion senior unsecured multicurrency revolving credit line, according to the filing. The drugstore chain might raise an additional 1.25 billion in pounds ($2 billion) with a senior unsecured term loan.
Walgreens Boots Alliance issued the 10-year notes at a spread of 145 basis points more than similar-maturity Treasuries, Bloomberg data show. The 10-year debentures would be considered "attractive" at 140 basis points or more, Carol Levenson, director of research at Gimme Credit LLC, wrote in a note today.
The company also issued $1.5 billion of 4.8 percent, 30-year bonds, equal $1.25 billion portions of five- and seven-year securities and $500 million of 4.5 percent, 20-year debentures, Bloomberg data show. The company sold $750 million each of 18-month, floating-rate notes and 1.75 percent, three-year securities. A basis point is 0.01 percentage point.
Alliance Boots loaded up on debt in a 11.1 billion pound leveraged buyout before the credit crisis in a deal arranged by KKR & Co. and Italian billionaire Stefano Pessina. Walgreen took a stake in the company for $6.7 billion in 2012, with an option to gain full control of the chain, in an effort to build a global pharmacy business.