Alliance Boots Extends Loans Facilitating Takeover by Walgreen
Alliance Boots Holdings Ltd., the U.K. drugstore chain part-owned by Walgreen Co. (WAG), extended the maturity of more than 5 billion pounds ($8 billion) of loans by two to three years, paving the way for the U.S. firm to acquire the entire company.
Lenders representing more than 80 percent of Alliance Boots’ facility agreed to push out the debt 2016 and beyond and amend the terms to facilitate a full combination, according to an e-mailed statement from the Zug, Switzerland-based company. The financing can now stay in place if Walgreen exercises its option to acquire the remaining 55 percent of Alliance Boots, which expires August 2015.
Walgreen bought its stake from KKR & Co. for $6.7 billion of cash and stock in June to expand abroad as the largest U.S. drugstore company loses prescription business at home. As part of the proposed second phase of the tie-up Walgreen said it will assume its target’s entire debt, which was about 7 billion pounds as of Mar. 31, according to an earnings statement from May 16.
“Our diverse lender group have been hugely supportive, enabling us to extend loans at attractive rates more than two and a half years before the majority mature,” Group Finance Director George Fairweather said in the e-mailed statement.
The extended debt will mature from 2016 on a staggered basis, the company said. Deutsche Bank AG, UniCredit SpA (UCG) and KKR Capital Markets Ltd. arranged the amendment.
Investors are betting Alliance Boots’ term loans will be paid off by its U.S. owner before they mature, bidding up the price of the loans to 98 pence on the pound today from 92.6 pence on June 18 before the deal was announced.
Senior lenders were offered a 50 basis point fee in return for the amendments, two people with knowledge of the proposed changes said Nov. 20. The so-called early-bird deadline was at the end of November and the final day for responses was yesterday.
As Alliance Boot’s largest shareholder, Walgreen will control more than 11,000 stores in 12 countries and 370 distribution centers to pharmacies, doctors and hospitals.
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