SCHEDULE 13D/A: Walgreens Boots Alliance Reduces Cencora Stake to 6.5% Through Strategic Divestment and Early Forward Contract Settlement

Walgreens Boots Alliance (WBA) has further reduced its ownership in Cencora, Inc. to approximately 6.5% through a combination of a direct share sale, early settlement of variable pre-paid forward contracts, and a share repurchase by Cencora, as part of WBA's capital optimization strategy.

Summary

• Walgreens Boots Alliance (WBA) has decreased its beneficial ownership in Cencora, Inc. to 12,570,000 shares, representing approximately 6.5% of the outstanding Common Stock as of February 10, 2025.
• This reduction was achieved through three concurrent transactions on February 6, 2025:
• WBA Holdings sold 1,081,885 shares of Common Stock in an unregistered block trade, representing approximately 0.6% of the outstanding Common Stock after giving effect to all concurrent transactions.
• WBA Holdings entered into early settlement agreements for variable pre-paid forward sale contracts (August 2023 and November 2023 Contracts), which previously obligated delivery of an aggregate of 7,410,000 shares.
• In the VPF early settlement, WBA Holdings agreed to deliver an aggregate of 6,123,624 shares (4,356,845 from August 2023 Contracts and 1,766,779 from November 2023 Contracts) and pay a net aggregate cash amount of $19,976,222.97 to the VPF financial institutions.
• Cencora, Inc. concurrently repurchased 204,491 shares directly from WBA Holdings at the same per share block price used in the February 2025 Sale.
• The transactions are part of WBA's efforts to optimize capital allocation, reduce indebtedness, and manage liabilities.

Sentiment

Score: 5

Explanation: Neutral to slightly negative for Cencora, as a major strategic investor is reducing its stake, which could imply a lack of significant future upside from WBA's perspective. However, it's part of WBA's stated capital optimization, which is a positive for WBA. The orderly nature of the divestment and Cencora's repurchase mitigate strong negative sentiment.

Positives

• WBA is actively optimizing its capital allocation, which is aimed at reducing indebtedness and improving liability management for the parent company.
• The early settlement of variable pre-paid forward contracts provides clarity and reduces future obligations for WBA Holdings.
• Cencora's direct share repurchase of 204,491 shares from WBA Holdings can be accretive to its earnings per share and demonstrates confidence in its own stock.

Negatives

• WBA's continued divestment reduces its strategic stake in Cencora, which could be interpreted by the market as a diminishing long-term strategic alignment or a lack of perceived significant future upside from WBA's perspective.
• WBA Holdings incurred a net aggregate cash payment of nearly $20 million ($19,976,222.97) in the VPF early settlement, indicating a cost associated with unwinding these positions prior to their scheduled maturity.

Risks

• WBA may effect one or more further sales of Common Stock in Cencora at any time without further notice, which could create additional supply and potential downward pressure on Cencora's stock price.
• The ultimate number of shares that may be sold by WBA is not ascertainable, creating uncertainty regarding the future supply of Cencora shares in the market.
• Decisions on future sales are subject to various factors outside WBA's control, including current and anticipated future trading prices of Cencora shares, Cencora's financial condition, and general economic, financial market, and industry conditions.

Future Outlook

Walgreens Boots Alliance (WBA) intends to continue optimizing its capital allocation, which may include further opportunistic sales of Cencora Common Stock through various transaction forms, such as public offerings, block trades, private sales, pledges, hedges, forward sales, and other derivative transactions. The timing and size of any such sales are not ascertainable and will depend on factors including Cencora's stock price, financial condition, market conditions, and WBA's strategic considerations. WBA may also choose to early settle other variable pre-paid forward sale contracts.

Management Comments

• "The February 2025 Sale, VPF Early Settlement and the February 2025 Share Repurchase are part of WBA's efforts to continue to optimize its capital allocation to reduce indebtedness and for liability management purposes."
• "From time to time, WBA undertakes a review of its strategic and capital allocation priorities."
• "Ornella Barra remains a director of the Issuer. It is currently expected that Ms. Barra (or another designee of WBA) will remain a director of the Issuer unless and until the occurrence of a Walgreens Investor Rights Termination Event."

Industry Context

This divestment by Walgreens Boots Alliance (WBA) reflects a broader trend among large conglomerates or strategic investors to streamline portfolios and focus on core competencies, often driven by capital allocation strategies aimed at debt reduction or reinvestment in primary business lines. For Cencora, the reduction of a significant shareholder's stake could lead to increased float and potentially a more diversified shareholder base, though it also removes a large, stable investor.

Stakeholder Impact

• Shareholders (Cencora): Potential for increased share float and diversified ownership; potential for short-term price volatility due to large block sales; Cencora's share repurchase can be accretive to EPS.
• Shareholders (WBA): Improved capital allocation and reduced indebtedness for WBA.
• Creditors (WBA): Reduced indebtedness could improve WBA's credit profile.

Next Steps

• WBA may effect one or more further sales of Cencora Common Stock.
• WBA may choose to early settle other variable pre-paid forward sale contracts.
• Ornella Barra (or another WBA designee) is expected to remain a director of Cencora until a Walgreens Investor Rights Termination Event.

Key Dates

Recommendation

Keywords

Cencora, Walgreens Boots Alliance, WBA, SEC Filing, Schedule 13D, Share Sale, Divestment, Beneficial Ownership, Variable Pre-paid Forward Contracts, VPF, Share Repurchase, Capital Allocation, Liability Management, Pharmaceutical Distribution, Healthcare Investment