Walgreens 2014 Annual Report Download - page 31

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The second step transaction is subject to conditions, including certain conditions that may not be satisfied,
and may not be completed on a timely basis, or at all. Failure to complete the second step transaction could
have material and adverse effects on the Company.
The completion of the second step transaction is subject to a number of conditions, including approval by the
shareholders of Walgreens of the issuance of shares to the Sellers as consideration for the second step
transaction, which makes the completion and timing of the completion of the second step transaction uncertain.
If the second step transaction is not completed on a timely basis, or at all, our ongoing businesses may be
adversely affected and, without realizing any of the benefits of having completed the second step transaction, we
will be subject to a number of risks, including the following:
• Subject to limited exceptions, if the closing of the second step transaction does not occur:
• the Company will be required to return to the Sellers 1/15th of the Alliance Boots shares acquired
by the Company in the first step transaction, which equals 3% of the issued and outstanding share
capital of Alliance Boots, in exchange for nominal consideration of one British pound sterling;
• the Company will continue to own a significant minority interest in Alliance Boots, but certain of
the Company’s governance rights as a shareholder of Alliance Boots will be modified;
• in general, the Company will not be permitted to sell or otherwise transfer any of its Alliance
Boots shares for a period of 24 months;
• in the event that one of the Sellers, AB Acquisitions Holdings Limited (AB Acquisitions), decides
to sell or otherwise transfer its Alliance Boots shares to a third party, AB Acquisitions will have
the right to require the Company to transfer all its Alliance Boots shares in the same transaction
on the same terms; and in the event that AB Acquisitions decides to sell some or all of its Alliance
Boots shares in an initial public offering, AB Acquisitions will have the right to require the
Company to participate proportionally by selling some or all of its Alliance Boots shares;
• Alliance Boots will have the right to either (a) acquire 50% of the AmerisourceBergen shares then
jointly owned by the Company and Alliance Boots through a joint venture entity, in exchange for
50% of the funding previously provided by the Company to the joint venture entity to acquire
AmerisourceBergen shares (plus interest) (a 50/50 dissolution) or (b) settle with the Company in
cash to replicate the same economic impact as a 50/50 dissolution, but with the Company
retaining 100% of the AmerisourceBergen shares; and
• if the Company subsequently becomes entitled to designate a second director nominee on the
AmerisourceBergen board of directors pursuant to the AmerisourceBergen shareholders
agreement to which both the Company and Alliance Boots are parties, the second director
nominee would be an Alliance Boots executive, designated by the Company in consultation with
and at the direction of Alliance Boots.
• The Company and Alliance Boots currently engage in various commercial transactions and
arrangements in connection with initiatives intended to help realize potential synergies across both
companies, including through Walgreens Boots Alliance Development GmbH, a global sourcing joint
venture. If the second step transaction does not occur, the status and prospects of, and future
willingness of either the Company and/or Alliance Boots to continue to engage in, these transactions
and arrangements, including Walgreens Boots Alliance Development GmbH, would be uncertain.
• The market price of Walgreens common stock could decline to the extent that the current market price
reflects a market assumption that the second step transaction will be completed.
• Uncertainty regarding the completion of the second step transaction may foster uncertainty among
employees about their future roles, which could adversely affect the ability of the Company to attract
and retain key personnel.
• The Company may be unable to capture the anticipated synergies associated with the second step
transaction and the Reorganization, including expected increases in earnings and cost savings.
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