Walgreens Closes PharMerica Buyout As KKR's Minority Partner

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) continues to dominate the headlines riding on its inorganic expansion spree. Following last week’s news on the company’s plan to invest in Chinese pharmacy chain Guoda, Walgreens Boots is once again grabbing attention with the piece of information revolving around its partnership with KKR & Co. L.P., which has completed the acquisition of pharmacy services provider, PharMerica Corp.

In August, Walgreens Boots along with privately held global investment firm KKR had announced this definitive merger agreement to acquire Pharmerica for an all-cash transaction valued at $1.4 billion. With the recent closing of this buyout, the newly formed company will be predominantly controlled by KKR and Walgreens Boots will only have a minor stake in it.

Walgreen Boots expects this investment to help it support quality and affordable patient care in a better fashion. While PharMerica will be entitled to additional resources and expertise to advance and grow its institutional pharmacy services business on the back of its aquirers KKR and Walgreens Boots’ strengths.

Notably, Walgreens Boots has set a major milestone in global expansion this month with its decision to acquire a 40% stake in Sinopharm Holding Guoda Drugstores Co., Ltd. (GuoDa), a subsidiary of China National Accord Medicines Corporation Ltd. Good news is that his investment should provide a strong incentive to Walgreens Boots’ worldwide retail pharmacy business on successful completion.

The company is also currently focusing on strategic collaborations in order to meet challenges in the U.S. Pharmacy market. During the fourth quarter of fiscal 2017, the company announced a partnership agreement with Fareva by dint of which, the latter will buy the former’s contract manufacturing business (“BCM”). Notably, BCM operates factories in the U.K., France and Germany. Management earlier noted that the partnership had initiated by the end of October. All these crucial developments should aid the company to maximize its scope and scale in retail pharmacy market.

Share Price

Over the past month, Walgreens Boots has been trading below the broader industry. The stock has gained 1.6%, as compared to the industry’s 2.9% increase during the period.

Zacks Rank and Key Picks

Walgreens Boots carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are PetMed Express, Inc. (PETS), Align Technology, Inc. (ALGN) and Luminex Corporation (LMNX). Notably, PetMed, Align Technology and Luminex sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 97.5% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 133% in a year.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock has gained 5.2% over the past three months.

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>