Boots says Walgreens deal should not mean job cuts

Stefano Pessina, the executive chairman of Alliance Boots, mounted a vigorous defence yesterday of his plans to sell the high street chemist and pharmaceuticals giant to the US drugstore chain Walgreens in a cash and shares deal worth $16.2bn (£10bn).

Citing cost savings of $150m over the next four years, the Italian billionaire also moved quickly to reassure Alliance Boots' 75,000 staff in the UK over the company's future following the "transformational deal". This will initially see Walgreens, America's biggest pharmacy chain with nearly 8,000 shops, acquire 45 per cent of Alliance Boots' equity for $6.7bn, comprising $4bn in cash and 83.4 million shares.

"How could I do a deal to kill Boots?" Mr Pessina said, adding: "I have done a deal to make Boots more visible, more international, to create a lot of new markets for Boots and for [the manufacturing and research and development site] Nottingham."

The initial transaction is expected to be completed by 1 September and Walgreens has the option to buy the remaining 55 per cent of the equity in Alliance Boots within two and a half years. Based on the current share price of Walgreens, the second step of the transaction is valued at $9.5bn.

The agreement, which is backed by both companies' boards, will create a retail pharmacy and wellbeing behemoth with more than 11,000 stores in 12 countries, as well as the world's biggest pharmaceuticals wholesaler. With a total workforce of 360,000, the combined company's network of more than 370 distribution centres will serve more than 170,000 pharmacies, doctors, clinics and hospitals in 21 countries.

The $16.2bn deal, which will see Walgreens take on Alliance Boots' £7bn of net debt, is the latest dramatic twist in the history of the Switzerland-based company. It follows the record £11.4bn highly leveraged deal – backed by the private equity giant KKR – that pulled Alliance Boots off the stock market in 2007. Alliance Boots, which has more than 3,300 retail stores globally, was formed in 2006 by the merger between Boots Group and the pharmaceuticals company Alliance Unichem.

Stefano Pessina, who owns about a third of Boots, will not take any cash of the deal. When the deal is finally completed he will become Walgreens' largest shareholder.