AmerisourceBergen Announces Strategic, Long-Term Relationship with Walgreens and Alliance Boots

  AmerisourceBergen Announces Strategic, Long-Term Relationship with Walgreens
  and Alliance Boots

   Agreement Includes 10-Year Brand and Generic Distribution Contract with
  Walgreens and Access to Generics Sourced Through Walgreens Boots Alliance
                        Development GmbH Joint Venture

Business Wire

VALLEY FORGE, Pa. -- March 19, 2013

AmerisourceBergen (NYSE: ABC) today announced that it is entering into a
strategic, long-term relationship with Walgreen Co. and Alliance Boots GmbH,
which will streamline the distribution of pharmaceuticals to Walgreens’ stores
and leverage global supply chain efficiencies while improving patient access
to affordable pharmaceuticals to increase the efficiency of the healthcare
system. AmerisourceBergen’s new expanded relationship with Walgreens and
Alliance Boots includes: a ten-year comprehensive primary pharmaceutical
distribution contract with Walgreens; access to generic drugs and related
pharmaceutical products through the Walgreens Boots Alliance Development joint
venture; and opportunities to accelerate the Company’s efforts to grow its
specialty and manufacturer services businesses domestically and
internationally. In furtherance of this new partnership, Walgreens and
Alliance Boots together have been granted rights to purchase an equity
position in AmerisourceBergen, which is described in greater detail below.

The new agreements are expected to be meaningfully accretive to
AmerisourceBergen’s earnings and strengthen its confidence in delivering solid
and sustainable long-term EPS growth. AmerisourceBergen has serviced
Walgreens’ specialty business for several years, and in our fiscal 2014, the
new relationship is expected to contribute an incremental $28 billion in
revenues and approximately 20 cents in earnings per share, excluding the
amortization of certain expenses related to the transaction, and certain
non-recurring costs, and net of certain start up expenses.

“AmerisourceBergen is very excited to be joining in this unique global
relationship with two of the undisputed leaders in healthcare,” said Steven H.
Collis, President and Chief Executive Officer of AmerisourceBergen. “As we all
recognize the imperatives of health reform not only here in the U.S. but also
globally, we have entered into a unique opportunity to unlock value in the
pharmaceutical supply chain by collaborating to leverage all of our proven
strengths. This new relationship will significantly strengthen and grow our
core business and increase our ability to deliver innovative solutions to our
customers, and long-term benefits to all of our stakeholders. Importantly,
these agreements not only expand our U.S. business, but also provide
opportunities to meaningfully grow our specialty and manufacturer services
businesses internationally."

“Today’s announcement marks another step forward in establishing an
unprecedented and efficient global pharmacy-led, health and wellbeing network,
and achieving our vision of becoming the first choice in health and daily
living for everyone in America and beyond,” said Gregory Wasson, President and
Chief Executive Officer of Walgreens. “We are excited to be expanding our
existing relationship with AmerisourceBergen to a ten-year strategic long-term
contract, representing another transformational step in the pharmaceutical
supply chain. We believe this relationship will create a wide range of
opportunities and innovations in the rapidly changing U.S. and global
healthcare environment that we expect will benefit all of our stakeholders.”

“This agreement with AmerisourceBergen, which we consider to be the
best-positioned pharmaceutical wholesaler in North America, is a promising
development for Walgreens and Alliance Boots following the formation of our
strategic partnership last year,” said Stefano Pessina, Executive Chairman of
Alliance Boots. “We strongly believe that our new partnership with
AmerisourceBergen will deliver long-term shareholder value by creating an
unmatched network of companies that is well positioned to anticipate
increasing market needs and expectations across the world. Together we will
bring tailored solutions to business partners, including manufacturers and
pharmacists, as well as to patients and consumers.”

Branded and Generic Pharmaceutical Distribution Contract

The ten-year comprehensive primary pharmaceutical supply agreement includes
the distribution of brand, generic, and specialty pharmaceuticals to
Walgreens’ retail stores, mail order and specialty pharmacies. The
distribution contract is effective September 1, 2013, and initially will
include branded pharmaceutical products that Walgreens has historically
sourced from distributors and suppliers. Over time, beginning in calendar year
2014, AmerisourceBergen will increasingly assume the distribution of the
generic products that Walgreens has historically self-distributed. The
increased volume will utilize unused capacity in AmerisourceBergen’s
distribution network, leverage prior investments in our new enterprise
resource planning system, and will help continue to drive improvements in
operational efficiency and productivity in the years ahead.

Global Supply Chain Opportunities

AmerisourceBergen’s access to the recently established Walgreens Boots
Alliance Development enables the Company to access generics and related
pharmaceutical products utilizing a global platform that is designed to make
it easier for manufacturers to bring products to market, improve access to
pharmaceuticals for healthcare providers worldwide, and yields compelling new
offerings to community pharmacies and others. In addition, we expect to share
global distribution best practices with Walgreens and Alliance Boots, and to
seek additional avenues for collaboration on new projects and services for the
benefit of all of our stakeholders.

Opportunities to Expand Specialty and Manufacturer Services Businesses

In addition to the pharmaceutical supply contracts, AmerisourceBergen has
agreed to collaboratively share best practices and to cooperatively work with
Walgreens and Alliance Boots to provide manufacturers with integrated
solutions for global clinical trial logistics and innovative global third
party logistics services by leveraging World Courier’s position as a global
leader in premium logistics. In addition, Alliance Boots’ growing specialty
activities with European biotech manufacturers and AmerisourceBergen’s
pharmaceutical product commercialization and patient support services offer
manufacturers unique opportunities to expand patient access to biotech
products in Europe and beyond.

Equity Position

As part of the value creation inherent in these agreements and to align
interests and strengthen the long-term relationship, Walgreens and Alliance
Boots together have been granted the right to purchase a minority equity
position in AmerisourceBergen, beginning with the right to purchase up to 7
percent of the fully diluted equity of AmerisourceBergen in the open market.
In addition, AmerisourceBergen has granted to Walgreens and Alliance Boots
equity warrants exercisable for 16 percent in the aggregate of the fully
diluted equity of AmerisourceBergen. The first tranche of warrants,
representing 8 percent of the fully diluted equity of AmerisourceBergen, has a
strike price of $51.50 and will be exercisable for a six-month period
beginning in March 2016. The second tranche of warrants, also representing 8
percent of the fully diluted equity of AmerisourceBergen, has a strike price
of $52.50 and will be exercisable for a six-month period beginning in March
2017. The warrants will be allocated equally among Walgreens and Alliance
Boots. Walgreens and Alliance Boots have agreed to customary transfer
restrictions on their equity stake, and have also agreed not to acquire
additional equity of AmerisourceBergen under the terms of a standstill
agreement, subject to the terms and conditions of such agreement, including
certain pre-emption rights and permitted exceptions.

Walgreens will have the ability to appoint one director to AmerisourceBergen’s
board upon Walgreens and Alliance Boots together acquiring a 5 percent equity
stake, and a second director upon exercise in full of the first warrants.
These new board seats will add to the Company’s current nine-member board.

Regulatory Approvals Required

The equity investment by Walgreens and Alliance Boots is subject to the
receipt of customary regulatory approvals.

Revised Guidance for Fiscal 2013

As a result of this new relationship, the Company expects incremental brand
revenues of at least $2 billion in September of 2013, and we have increased
our guidance for revenue growth to 8 percent to 11 percent for the full fiscal
year. The company has revised its expectations for GAAP earnings per share
from continuing operations for fiscal 2013 to a range of $2.96 to $3.06, as
certain one-time start up operational expenses and transaction costs will more
than offset the addition of the new business late in our fiscal fourth
quarter. The revised range does not include the impact of a significant
one-time LIFO expense due to the inventory build anticipated in relation to
the new business, or an intangible amortization expense related to the equity
warrants. We expect to have additional information available on the LIFO and
amortization expenses, the expected decline in operating margins and other
items when we report results for our March fiscal quarter.

The Company had previously expected free cash flow for fiscal 2013 to be in
the range of $750 to $850 million, and now expects that range to decrease
significantly to $100 to $200 million as we onboard the new business, and
incur an additional $40 million in related capital expenses.

Conference Call

The Company will host a conference call today at 7:30 a.m. Eastern Daylight.
Participating in the conference call will be: Steven H. Collis, President and
Chief Executive Officer of AmerisourceBergen; and Tim G. Guttman, Senior Vice
President and Chief Financial Officer of AmerisourceBergen. In addition,
Gregory Wasson, President and Chief Executive Officer of Walgreens, and
Stefano Pessina, Executive Chairman of Alliance Boots, will be our special
guests on the conference call.

To access the live conference call via telephone:
Dial in: The dial-in number for the live call will be (612) 326-1011. No
access code is needed.

To access the live webcast:
Go to the Investor Relations page at http://www.amerisourcebergen.com.

A replay of the telephone call and webcast will be available from 10:30 a.m.
March 19, 2013 until 11:59 p.m. March 26, 2013. The Webcast replay will be
available for 30 days.

To access the telephone replay from within the US, dial 800-475-6701. From
outside the US, dial 320-365-3844. The access code for the replay is 286668.

To access the archived webcast, go to the Quarterly Webcasts section on the
Investor Relations page at http://www.amerisourcebergen.com.

Additional Information

AmerisourceBergen intends to promptly file with the Securities and Exchange
Commission a current report on Form 8-K, which will include the Framework
Agreement, Warrants and Shareholders Agreement. You should refer to the Form
8-K when it is available for more detailed information regarding this
strategic transaction between AmerisourceBergen, Walgreens, and Alliance Boots
and related matters.

About AmerisourceBergen

AmerisourceBergen is one of the world's largest pharmaceutical services
companies serving the United States, Canada and selected global markets.
Servicing both healthcare providers and pharmaceutical manufacturers in the
pharmaceutical supply channel, the Company provides drug distribution and
related services designed to reduce costs and improve patient outcomes.
AmerisourceBergen's service solutions range from niche premium logistics and
pharmaceutical packaging to reimbursement and pharmaceutical consulting
services. With over $80 billion in annualized revenue, AmerisourceBergen is
headquartered in Valley Forge, PA, and employs approximately 13,000 people.
AmerisourceBergen is ranked #29 on the Fortune 500 list. For more information,
go to www.amerisourcebergen.com.

AmerisourceBergen’s Cautionary Note Regarding Forward-Looking Statements

Statements in this release that are not historical are forward-looking
statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,”
“outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,”
“intend,” “plan,” “continue,” “sustain,” “synergy”, “on track,” “believe,”
“seek,” “estimate,” “anticipate,” “may,” ”possible,” “assume,” variations of
such words and similar expressions are intended to identify such
forward-looking statements. These statements are based on management’s current
expectations and are subject to uncertainty and changes in circumstances.
These forward-looking statements are not guarantees of future performance, are
based on assumptions that could prove incorrect or could cause actual results
to vary materially from those indicated, and are subject to risks and
uncertainties, including the failure to obtain the required U.S. and foreign
antitrust regulatory approvals for the equity investments by Walgreens and
Alliance Boots in AmerisourceBergen, the occurrence of any event, change or
other circumstance that could give rise to the termination, cross-termination
or modification of any of the transaction documents, including, among others,
the distribution agreement or the generics agreement, an impact on
AmerisourceBergen’s earnings per share resulting from the exercise of the
warrants, the disruption of AmerisourceBergen’s plans and operations as a
result of the transaction, the inability to realize anticipated synergies,
including synergies resulting from participation in the Walgreens Boots
Alliance Development GmbH joint venture,potential operating dis-synergies,
disruption resulting from potential vendor, payor and customer reaction to the
transaction, the inability to achieve anticipated financial results,
unexpected costs, fees, expenses and charges incurred by AmerisourceBergen
related to the transaction, the disruption of AmerisourceBergen’s cash flow
and ability to return value to its stockholders in accordance with its past
practices, risks associated with international business operations, changes in
vendor, payer and customer relationships and terms, the reduction of
AmerisourceBergen’s operational, strategic or financial flexibility, and other
factors described in Item 1A (Risk Factors) of our most recent Annual Report
on Form 10-K and Quarterly Report on Form 10-Q, each of which is incorporated
herein by reference, and in other documents that we file or furnish with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those indicated or anticipated by such
forward-looking statements. Accordingly, you are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
they are made. Except to the extent required by law, AmerisourceBergen does
not undertake, and expressly disclaims, any duty or obligation to publicly
update any forward-looking statement after the date of this report, whether as
a result of new information, future events, changes in assumptions or
otherwise.

Contact:

AmerisourceBergen
Barbara Brungess, 610-727-7199
bbrungess@amerisourcebergen.com
 
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