| Item 1.01. | Entry into a Material Definitive Agreement. |
Unit Purchase Agreement
On October 14, 2021, WBA Acquisition 4, LLC (“Walgreens”), a subsidiary of Walgreens Boots Alliance, Inc. (the “Company”), entered into a Class D Preferred Unit Purchase Agreement (the “Unit Purchase Agreement”), by and among Walgreens, Village Practice Management Company, LLC (“VillageMD”) and, for certain purposes specified therein, the Company and another of its subsidiaries and certain other members of VillageMD (the “Specified Members”).
Pursuant to the terms and subject to the conditions set forth in the Unit Purchase Agreement, in exchange for $5.2 billion in aggregate consideration (the “Purchase Price”), Walgreens will increase its existing stake in VillageMD by acquiring Class D Preferred Units of VillageMD and, at the election of certain Specified Members, securities of the electing Specified Members corresponding to the rights and obligations of Class D Preferred Units held by such Specified Members (collectively, the “Transaction”). The Transaction is contemplated to increase the Company’s beneficial ownership of the outstanding equity interests of VillageMD from approximately 30% to approximately 63% on a fully diluted basis. The Purchase Price payable in connection with the consummation of the Transaction will be comprised of (i) $4.0 billion in cash and (ii) a promissory note in the principal amount of $1.2 billion.
The Company expects to fund the cash portion of the Purchase Price through a combination of cash on hand and amounts available under the Facility, as further described in Item 8.01 herein. Following the consummation of the Transaction, the Company will consolidate VillageMD for purposes of its consolidated financial statements.
The consummation of the Transaction is subject to customary closing conditions, including the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The Unit Purchase Agreement contains certain termination rights of Walgreens and VillageMD and, upon the termination of the Unit Purchase Agreement under specified circumstances, including the failure of the applicable waiting period under the HSR Act to expire or terminate by a specified outside date or the Transaction otherwise being prohibited pursuant to a government order under the HSR Act, Walgreens will be required to pay VillageMD a termination fee of $150 million.
The Company has additionally agreed to appoint one member of the board of managers of VillageMD to the board of directors of the Company (the “Board of Directors”) in connection with, and effective no later than, the consummation of the Transaction. Pursuant to the terms of the Unit Purchase Agreement, such appointee will be selected by certain founding members of VillageMD, and is subject to the approval of the Nominating and Governance Committee of the Board of Directors.
The foregoing description of the Unit Purchase Agreement and the Transaction does not purport to be complete and is qualified in its entirety by reference to the full text of the Unit Purchase Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference. The representations, warranties and covenants in the Unit Purchase Agreement were made solely for the benefit of the parties to the Unit Purchase Agreement for the purpose of allocating contractual risk between those parties, and do not establish these matters as facts. Investors should not rely on the representations, warranties and covenants as characterizations of the actual state of facts or condition of Walgreens, VillageMD or any of their respective subsidiaries or affiliates, including the Company.
