EU CONSUMER STAPLES: Walgreen Boots; Cencora stake liquidity likely exhausted
(WBA: B1/BB-; Stable) {WBA US Equity}
Some revisions down in our assumptions of value in Cencora stake it held. Most of it was in forwards which it had received cash from already (still gives it theoretical ownership till delivery). Dividend pause and a now $300m from below as it attempts to shore up the BS to tackle "FY26 maturities". As we said £25s should be safe home from here yet we have heard of steady stream of flows/selling - surprising given <2pts below par and a 3.6% final coupon being left behind. We still think the €26s has beta to earnings; key 2Q generally comes late March (~2 months).
- Reduced stake in Cencora {COR US Equity} from 10% to 6%. At COR's market cap that would imply $1.9b in proceeds but 3% (of the 4%) was in prepaid variable share forward transactions - WBA had already received $1.1b since 2023 and was only due to deliver the shares. Share px moves since netted it $20m on those contracts.
- It also did an additional 1.3m/<1% in normal shares which netted it $280m (implies ~$215/share)
- The remaining 12.6m/6% seems to be tied to prepaid forward contracts in which case only favourable share px moves would net proceeds. I.e. we effectively see Cencora stake liquidity exhausted.
- Use of proceeds is to "proactively address debt maturities in FY26" (to Aug 2026).
- $1.2b of cash and eqv's on balance sheet at Nov. $800m due in '25, more sizeable wall in '26.
- €26s par callable only from Aug '26, MWC is at +20.
- In terms of other liquid assets;
- 12% stake in {BTSG US Equity} valued at ~$500m
- VillageMD; the loss-making clinics, many of which are attached to Walgreen stores is 75% of the US healthcare segment sales ($6.3/8.4b) - has been tabled for sale, clinics being closed, defaults on loans given to it.
- Boots IPO (50% of international; $12/23.5b) was called off last year - head of Boots departed soon after that decision.
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Chart 1. Austrian National Council, Seats
Source: parlament.gv.at, MNI. N.b. Numbers in brackets indicate change of seats at 2024 election.
