History Repeats in Walgreens Deal for Alliance Boots

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NEW YORK ( TheStreet) -- Investors hated Walgreens decision to buy Alliance Boots in 2012. Now, after shares in the drugstore chain more than doubled since the deal's initial announcement, Wall Street is again disappointed.

Walgreens shares fell as much as 15% on Wednesday morning after the company said that it wouldn't shift its headquarters abroad as it completes the two-step acquisition of Alliance Boots. The company also lowered revenue targets for the combined company to between $126 billion and $130 billion from a previous guidance of more than $130 billion in annual sales.

Wednesday's share rout is familiar territory for Walgreens and a possible opportunity for long-term investors. After all, the company's stock tumbled to multi-year lows below $30 a share in July 2012 after initially announcing its Alliance Boots deal. Shares, which then steadily rose to a record-high above $75 in June, are now in the low $60s.

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Once investors absorb Walgreens disappointing guidance, its decision not to chase tax savings by incorporating abroad and a different financial outlook after shifting guidance from earnings before interest and taxes (EBIT) to earnings per share (EPS), they may remember that Alliance Boots looks like a very compelling acquisition.

Expectations on synergies and cost savings from Alliance Boots catapulted Walgreens shares in recent years, and synergy targets in excess of $1 billion remain in place . Perhaps, Walgreens has set a low bar from which it can now beat Wall Street's expectations.

Meanwhile, not all news was bad on Wednesday.

Alliance Boots is considered one of the best-run pharmacies in the world. Its chairman, Stefano Pessina, built up an international powerhouse within the span of about a decade, and he and top executives at Alliance Boots will take key roles within Walgreens. If the management of Walgreens has underperformed competitors like CVS Caremark in recent years, its bench has deepened significantly with the acquisition of Alliance Boots.

Walgreens CEO Gregory Wasson will remain CEO of the combined company, and Walgreens independent Chairman James Skinner will be non-executive chairman of the new company, which will be called Walgreens Boots Alliance.

Pessina will hold a role as executive chairman of Alliance Boots and executive vice chairman of the combined company. Pessina will report to Wasson and be tasked with strategy and M&A, in addition to chairing a strategy committee for the combined company.

Four of the nine-member management team will be made up of legacy Alliance Boots executives and Jefferies analysts noted that Alliance Boots will have a prominent role in the combined company.

Alex Gourlay, a former Boots executive, will become president of Walgreens, while Ornella Barra, another Alliance Boots executive, will become CEO of global wholesale.