Walgreen and strategic partner Switzerland-based Alliance Boots have entered into a 10-year agreement with pharmaceutical distribution wholesaler AmerisourceBergen , the companies announced Tuesday.

Walgreen took a 45% stake in Alliance Boots in June 2012, with the option to purchase the remaining shares within two years.

The new agreement expands on an existing relationship between Walgreen and AmerisourceBergen, and now includes primary distribution of generic and branded pharmaceutical products, scheduled to take effect Sept. 1. Terms of the contract are "market based," and Walgreen said it expects only mild accretion in fiscal 2014, excluding one-time expenses.


AmerisourceBergen will work with the Walgreen/Alliance Boots Development global platform to enhance worldwide distribution processes. Walgreen and Alliance Boots also have the option to purchase as much as 7% of AmerisourceBergen's stock in the open market.

Additionally, Walgreen and Alliance Boots received warrants for AmerisourceBergen stock, equal to a 16% equity position. The first warrants have a strike price of $51.50 per share, and are exercisable over a six-month period beginning March 2016. The remaining 8% stake will be available March 2017 and are also exercisable over six months, at a price of $52.50 a share.

AmerisourceBergen said the new agreements are expected to be "meaningfully accretive" to earnings. In FY 2014, the new relationship is expected to contribute an incremental $28 billion in revenues and approximately $0.20 in EPS, excluding the amortization of certain expenses related to the transaction, and certain non-recurring costs, and net of certain start up expenses.

Walgreen CEO Greg Wasson was quoted as saying: "We are excited to be expanding our existing relationship with AmerisourceBergen to a 10-year strategic long-term contract, representing another transformational step in the pharmaceutical supply chain."

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The article Walgreen Expands AmerisourceBergen Strategic Partnership originally appeared on Fool.com.

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