NEW YORK (TheStreet) -- Shares of Walgreen Co. (WAG) are up 1.29% to $66.51 after it was reported that Walgreens Boots Alliance Inc. is planning to sell $8 billion of bonds in seven portions as it prepares to pay about $15.3 billion for the part of Alliance Boots it doesn't already own, Bloomberg reports.

The biggest part of the dollar-denominated offering will be $2 billion of 10-year, fixed-rate notes, sources told Bloomberg. Walgreen Co. previously controlled about 45% of Alliance Boots, the Swiss company that runs pharmacy and beauty stores in Europe.

It will pay about $5.29 billion in cash and $10 billion in Walgreen stock for the remaining stake, the Deerfield, Illinois-based company said in a statement today. Proceeds of the bond sale may help fund the purchase of the remainder of Alliance Boots and help refinance its borrowings, according to a regulatory filing.

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TheStreet Recommends

TheStreet Ratings team rates WALGREEN CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate WALGREEN CO (WAG) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WAG's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,384.00 million or 23.24% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.37%.
  • WAG's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that WAG's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
  • WALGREEN CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WALGREEN CO reported lower earnings of $2.00 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($3.59 versus $2.00).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: WAG Ratings Report

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