Walgreens 2014 Annual Report Download - page 33

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We may incur higher than expected integration, transaction and acquisition-related costs.
We expect to incur a significant amount of non-recurring costs associated with the Transactions, including legal,
accounting, financial and tax advisory and other transaction fees and costs. Some of these costs are payable
regardless of whether the second step transaction and/or the Reorganization are completed and such costs may be
material and/or higher than expected.
The second step transaction will increase our exposure to certain joint ventures and investments of
Alliance Boots over which we would not have sole control. Some of these companies may operate in sectors
that differ from our or Alliance Boots’ current operations and have different risks.
The completion of the second step transaction will increase our and our shareholders’ effective interest in certain
joint ventures and other investments of Alliance Boots over which Alliance Boots does not exercise control.
Investments in these businesses, among other risks, subject us to the operating and financial risks of these
businesses and to the risk that we do not have sole control over the operations of these businesses. Investments in
entities over which we (including through Alliance Boots) do not have sole control, including joint ventures and
strategic alliances, present additional risks such as having differing objectives from our partners or the entities in
which we or Alliance Boots are invested, or becoming involved in disputes, or competing with those persons. In
addition, we rely on the internal controls and financial reporting controls of these entities and their failure to
maintain effectiveness or comply with applicable standards may adversely affect us. In addition, Alliance Boots
owns a 49% interest in Alliance Healthcare Italia S.p.a., a pharmaceutical wholesaling, distribution and retail
pharmacy business operating primarily in Italy, over which AB Acquisitions is, and, following the completion of
the second step transaction, will remain, the controlling 51% shareholder.
The second step transaction, if consummated, would reduce the percentage ownership interests of our
current shareholders and the principal shareholders of AB Acquisitions may have significant voting
influence over matters requiring shareholder approval.
Upon completion of the second step transaction, existing Walgreens shareholders will own a smaller percentage
of Walgreens Boots Alliance (or Walgreens) common stock than they currently own. In addition, while, as of the
date of this report, we have no present intention or plans to do so, it is also possible that we will decide to issue
common stock, or securities convertible into common stock, in a public or private offering to finance the second
step transaction.
In connection with the closing of the first step transaction on August 2, 2012, we issued approximately
83.4 million shares of our common stock to Alliance Boots shareholders and entered into the Company
Shareholders Agreement. These shares represented approximately 8.8% of our outstanding shares as of
August 31, 2014 (approximately 7.6% of the pro forma total outstanding shares of Walgreens Boots Alliance,
assuming completion of the Transactions as of that date and giving effect to the share issuance in the second step
transaction), the substantial majority of which are held by the SP Investors (approximately 7.7% of our
outstanding shares as of August 31, 2014 or approximately 6.7% of the pro forma total outstanding shares of
Walgreens Boots Alliance, assuming completion of the Transactions as of that date and giving effect to the share
issuance in the second step transaction). If the second step transaction is completed, we will acquire the
remaining 55% interest in Alliance Boots for £3.133 billion (equivalent to approximately $5.2 billion based on
exchange rates as of August 31, 2014) in cash, payable in British pounds sterling, and 144.3 million shares of
Walgreens common stock, subject to certain potential adjustments, representing approximately 13.2% of the
estimated pro forma total outstanding shares of Walgreens Boots Alliance as of August 31, 2014, assuming
completion of the Transactions as of that date and giving effect to the share issuance in the second step
transaction. It is expected that, following the closing of the second step transaction, AB Acquisitions would
distribute the cash and shares received by it in connection with the transaction to the SP Investors, the KKR
Investors and the other investors in AB Acquisitions (Other Investors), subject to the timing considerations noted
below. Accordingly, while the final allocation between cash and shares to be received by each of the SP
Investors, the KKR Investors and the Other Investors has not yet been determined, the beneficial ownership of
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