Walgreens 2015 Annual Report Download - page 40

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read
together with the financial statements and the related notes included elsewhere herein. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from
those discussed in forward-looking statements. Factors that might cause a difference include, but are not limited
to, those discussed under “Cautionary Note Regarding Forward-Looking Statements” below and in “Risk
Factors” in Part I, Item 1A of this Form 10-K. References herein to the “Company”, “we”, “us”, or “our” refer
to Walgreens Boots Alliance, Inc. and its subsidiaries from and after the effective time of the Reorganization on
December 31, 2014 and, prior to that time, to its predecessor Walgreen Co. and its subsidiaries, and in each
case do not include unconsolidated partially-owned entities, except as otherwise indicated or the context
otherwise requires.
OVERVIEW
On December 31, 2014, Walgreens Boots Alliance, Inc. became the successor of Walgreen Co. pursuant to a
merger to effect a reorganization of Walgreens into a holding company structure, with Walgreens Boots Alliance
becoming the parent holding company. Pursuant to the Reorganization, Walgreens became a wholly-owned
subsidiary of Walgreens Boots Alliance, a Delaware corporation formed for purposes of the Reorganization, and
each issued and outstanding share of Walgreens common stock was converted into one share of Walgreens Boots
Alliance common stock. Walgreens Boots Alliance, as successor to Walgreens, replaced Walgreens as the
publicly-held corporation.
On December 31, 2014, following the completion of the Reorganization, Walgreens Boots Alliance completed
the acquisition of the remaining 55% of Alliance Boots GmbH that Walgreens did not previously own in
exchange for £3.133 billion ($4.874 billion) in cash and approximately 144.3 million shares of Walgreens Boots
Alliance common stock pursuant to the Purchase and Option Agreement. Walgreens previously had acquired, on
August 2, 2012, a 45% equity interest in Alliance Boots along with a call option to acquire the remaining 55%
equity interest in Alliance Boots in exchange for $4.025 billion in cash and approximately 83.4 million shares of
Walgreens common stock.
Prior to the completion of the Second Step Transaction, we accounted for our 45% investment in Alliance Boots
using the equity method of accounting. Investments accounted for under the equity method are recorded initially
at cost and subsequently adjusted for our share of the net income or loss and cash contributions and distributions
to or from these entities. Net income reported by Alliance Boots during this period was translated from British
Pounds Sterling at the average rate for the period. Upon completion of the Second Step Transaction, Alliance
Boots became a consolidated subsidiary and ceased being accounted for under the equity method. For financial
reporting and accounting purposes, Walgreens Boots Alliance was the acquirer of Alliance Boots. The
consolidated financial statements (and other data, such as prescriptions filled) reflect the results of operations and
financial position of Walgreens and its subsidiaries for periods prior to December 31, 2014 and of Walgreens
Boots Alliance and its subsidiaries for periods from and after the effective time of the Reorganization on
December 31, 2014.
RECENT DEVELOPMENT
On October 27, 2015, the Company entered into the Merger Agreement with Rite Aid, pursuant to which the
Company agreed to acquire Rite Aid, a drugstore chain in the United States with 4,561 stores in 31 states and the
District of Columbia as of August 29, 2015. On the terms and subject to the conditions set forth in the Merger
Agreement, Rite Aid will become a wholly-owned subsidiary of the Company and Rite Aid stockholders will be
entitled to receive $9.00 in cash for each outstanding share of Rite Aid common stock, for a total enterprise value
of approximately $17.2 billion, including acquired net debt. The transaction is expected to close in the second
half of calendar 2016, subject to Rite Aid stockholder approval, regulatory approvals and other customary closing
conditions.
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