Walgreens (WAG) Analyst: Juan Fabres Fall 2014
Walgreens (WAG) Analyst: Juan Fabres Fall 2014 Recommendation: Buy Target Price August 31, 2016: $77.57 1. Reasons for the Recommendation With the acquisition of Alliance Boots in Europe, Walgreens will be the first US pharmacy to operate retail stores on a global scale. Recently, Alliance Boots acquired Farmacias Benavides in Mexico, and Farmacias Ahumada in Chile. This means that the new holding company, Walgreens Boots Alliance will operate in Asia, North America, South America, Europe, and Asia. These two companies combined will create a synergy that will provide the US and Europe with tremendous value that enables innovative quality healthcare and treatment at an affordable price to millions of consumers across the world and establish themselves as a dominant global pharmacy. Walgreens chose to exercise its option to purchase the remaining 55% stake in Alliance boots on August of 2014 instead of February of 2015, which is almost a quarter before its original exercise date. The acquisition is expected to be finalized by February of 2015. These two companies have partnered with AmerisourceBergen in a ten year agreement. AmerisourceBergen has recently struck a deal with ProFarma in Brazil, allowing the company to develop relationships with drug makers across the world enabling it to receive better discounts and diversify products and sales. As AmerisourceBergen expands into foreign markets, it will be able to gain economies of scale. This also means that as it opens its relationships with larger amounts of drug makers, it will reduce the bargaining power of suppliers, and as a buyer will enhance its bargaining power. Walgreens and Alliance Boots have the right to acquire 23% equity of AmerisourceBergen in 2016 and 2017.
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