Walgreens 2014 Annual Report Download - page 56

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such consideration being subject to adjustment in certain circumstances including if the volume weighted-
average price of our common stock is below $31.18 per share during a period shortly before the closing of the
second step transaction. We (or Walgreens Boots Alliance, as applicable) also would assume the then-
outstanding debt of Alliance Boots upon the closing of the second step transaction. As of its March 31, 2014
fiscal year end, Alliance Boots had total borrowings of approximately £5.7 billion (equivalent to approximately
$9.5 billion based on exchange rates as of March 31, 2014). We also expect to incur other fees and expenses
associated with the closing of the transaction.
Our obligation to complete the second step transaction is not subject to the receipt of financing. Based on
exchange rates as of August 31, 2014, we currently estimate that the total amount of funds required to pay the
cash portion of the second step transaction consideration, refinance all or substantially all of the Alliance Boots’
existing long-term debt, and pay related fees and expenses, will be approximately $15 billion. We currently
expect to finance the second step transaction cash consideration and/or the refinancing of all or substantially all
of the indebtedness of Alliance Boots with a combination of the issuance of new debt (which may include a range
of instruments including commercial paper, borrowings under existing or new bank credit facilities, and issuance
of debt securities) and available cash on our balance sheet. We will determine the specific timing, sources and
related matters based on our assessment of various factors including prevailing market conditions, the economic
environment and other factors.
Pursuant to our arrangements with AmerisourceBergen and Alliance Boots, we and Alliance Boots have the
right, but not the obligation, to purchase a minority equity position in AmerisourceBergen over time pursuant to
open market purchases and warrants to acquire AmerisourceBergen common stock. WAB Holdings, LLC, a
newly formed entity jointly owned by Walgreens and Alliance Boots, which is consolidated by Walgreens, can
acquire up to 19,859,795 shares, which represents approximately 7% of the outstanding AmerisourceBergen
common stock on a fully diluted basis, assuming exercise in full of the warrants. The amount of permitted open
market purchases is subject to increase in certain circumstances. We have purchased a total of approximately
11.5 million AmerisourceBergen shares in the open market, including 7.5 million with a cost basis of $493
million in fiscal 2014. We have funded and plan to continue funding these purchases over time through cash
contributions to WAB Holdings. Share purchases may be made from time to time in open market transactions or
pursuant to instruments and plans complying with Rule 10b5-1.
If we elect to exercise the two warrants issued by AmerisourceBergen in full, Walgreens would, subject to the
terms and conditions of such warrants, be required to make a cash payment of approximately $584.4 million in
connection with the exercise of the first warrant during a six-month period beginning in March 2016 and $595.8
million in connection with the exercise of the second warrant during a six-month period beginning in March
2017. Similarly, if Alliance Boots elects to exercise the two warrants issued by AmerisourceBergen in full,
Alliance Boots would, subject to the terms and conditions of such warrants, be required to pay
AmerisourceBergen similar amounts upon the exercise of their warrants in 2016 and 2017. Our and Alliance
Boots ability to invest in equity in AmerisourceBergen above certain thresholds is subject to the receipt of
regulatory approvals.
See Item 7A (Qualitative and Quantitative Disclosures about Market Risk) below for a discussion of certain
financing and market risks.
COMMITMENTS AND CONTINGENCIES
The information set forth in Note 12 to our Consolidated Financial Statements included in Part II, Item 8 of this
Form 10-K is incorporated herein by reference.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with accounting principles generally accepted
in the United States of America and include amounts based on management’s prudent judgments and
estimates. Actual results may differ from these estimates. Management believes that any reasonable deviation
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