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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 as of and after the closing of the Reorganization on December 31,
2014. For additional information, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” (“MD&A”) in Part II, Item 7 below and Note 6, Equity Method Investments, to the
Consolidated Financial Statements included in Part II, Item 8 below.
On March 19, 2013, Walgreens, Alliance Boots and AmerisourceBergen Corporation (“AmerisourceBergen”)
announced various agreements and arrangements, including a ten-year pharmaceutical distribution agreement
between Walgreens and AmerisourceBergen pursuant to which branded and generic pharmaceutical products are
sourced from AmerisourceBergen in the U.S.; an agreement which provides AmerisourceBergen the ability to
access generics and related pharmaceutical products through Walgreens Boots Alliance Development GmbH
(“WBAD”), a global sourcing enterprise formed by Walgreens and Alliance Boots; and agreements and
arrangements pursuant to which we have the right, but not the obligation, to purchase a minority equity position
in AmerisourceBergen and gain associated representation on AmerisourceBergen’s board of directors in certain
circumstances. Please refer to our Form 8-K filed on March 20, 2013 for more detailed information regarding
these agreements and arrangements. As of August 31, 2015, we owned approximately 5.2% of the outstanding
common shares of AmerisourceBergen and had designated one member of AmerisourceBergen’s board of
directors.
In addition, we have undertaken a number of additional acquisitions, divestitures, and strategic initiatives in
recent years designed to grow our businesses and enhance our competitive position. These initiatives are
described in MD&A in Part II, Item 7 below and Note 4, Restructuring, Note 6, Equity Method Investments and
Note 8, Acquisitions to the Consolidated Financial Statements included in Part II, Item 8 below.
Pending Transaction
On October 27, 2015, the Company entered into an Agreement and Plan of Merger with Rite Aid Corporation
(“Rite Aid”) and Victoria Merger Sub, Inc., a wholly-owned subsidiary of the Company (the “Merger
Agreement”), pursuant to which the Company agreed, subject to the terms and conditions thereof, 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. 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. For more information, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7
below and Note 21, Subsequent Event, to our Consolidated Financial Statements in Part II, Item 8 below.
Industry Overview
The global retail pharmacy and pharmaceutical wholesale industries are highly competitive and have been
experiencing consolidation in recent years. Prescription drugs play a significant role in healthcare and constitute
a first line of treatment for many medical conditions. We believe the long-term outlook for prescription drug
utilization is strong due, in part, to aging populations, increases in life expectancy, increases in the availability
and utilization of generic drugs, the continued development of innovative drugs that improve quality of life and
control healthcare costs, and increases in the number of persons with insurance coverage for prescription drugs,
including, in the United States, the expansion of healthcare insurance coverage under the Patient Protection and
Affordable Care Act (the “ACA”) and “baby boomers” increasingly becoming eligible for the federally funded
Medicare Part D prescription program. Wholesalers in the pharmaceutical distribution business function as a vital
link between drug manufacturers and pharmacies and healthcare providers in supplying pharmaceuticals to
patients.
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