Stelios Charitopoulos, Hogan Lovells

Working on a massive healthcare merger in the middle of a pandemic is one way to make your mark just months after qualifying, as Hogan Lovells associate Stelios Charitopoulos would discover working on AmerisourceBergen Corporation’s (ABC) acquisition of Alliance Healthcare.

“This was the first time that I worked on such a transformative deal in an industry that was under unprecedented scrutiny globally. The prevailing geopolitical context magnified the complexity of the deal and necessitated very close engagement to navigate potential government concerns in several jurisdiction”, he says.

“The transaction was also unique compared to other deals I have worked on in terms of how ambitious and strategic it was for our client and more widely the industry as well as in terms of the sheer scale and variety of the regulatory hurdles that had to be overcome (including several merger control, Foreign Direct Investment (FDI), and sectoral filings as well as close engagement with additional authorities).”

Charitopoulos’s previous deals include working with lead partner on the ABC transaction, Suyong Kim, on various deals, ranging from advising a software design and semiconductor company on the potential public interest implications of an anticipated transaction and the interplay with merger control investigations to advising a multinational food ingredient provider in respect of several transactions.

He’s also worked with partner Mark Jones on advising a global sports and music entertainment company on obtaining CMA clearance for the creation of a JV as well as in relation to the acquisition of a mobile app marketing and retargeting platform by an investment management company.

Charitopoulos started his training contract at Hogan Lovells in February 2018, including a secondment to the competition team in the firm’s Brussels office. He qualified into the competition, public and EU law team in February 2020.

Walgreens Boots Alliance sells Alliance Healthcare

Meanwhile, as part of an ongoing strategic review, Walgreens Boots Alliance (WBA) decided to offload its European wholesale distribution business, Alliance Healthcare. The objective was to be able to concentrate its efforts on rebuilding its retail presence and its rapidly growing in-store primary care business, VillageMD.

Finding a buyer was not in itself a problem. AmerisourceBergen Corporation (ABC) was the perfect fit, had worked with WBA for several years, and more to the point wanted to buy it.

Alliance Healthcare would give ABC a significantly larger footprint in Europe, where Boots Alliance operates in 13 key markets, supplying more than 115,000 pharmacies. But there were complications: WBA was already ABC’s biggest customer and largest shareholder, with a 27 per cent stake in the business. Assuming WBA would be unwilling to sell its stake to get the deal done, the transaction would mean an even deeper relationship between the two companies.

Despite those concerns, the two parties agreed to a deal. With ABC a long-term client of the firm, Hogan Lovells stepped in to guide the company through the maze of UK and European M&A regulations and complexities (Boots Alliance had been based in Switzerland since the merger), but also in getting the deal past antitrust regulators and government departments dealing with foreign direct investment.

ABC agreed to pay US$6.47bn for Alliance Healthcare, together with specified pre-wholesale and other services, as well as retail pharmacy operations in Lithuania, the Netherlands and Norway. This was the most significant European retail or wholesale pharmaceutical deal since the original 2014 transaction that created WBA. Once completed, the transaction would make ABC a global leader in pharmaceutical distribution and services.

“This was a very big, complex transaction that was completed within an ambitious timeframe”, Charitopoulos recalls. He describes the deal as “a steep learning curve” in terms of organising and coordinating the team, as well as local counsel, under unprecedented conditions.

“The pandemic created a challenging geopolitical context for the transaction. The strain on the global supply chains for medicines and vaccines meant that the healthcare industry was under intense scrutiny (arguably greater than ever before) from regulators, governments, and the wider public. This affected the complexity of the transaction and the sensitivity of the FDI workstreams.”

The proposed transaction was structured as a share sale satisfied by US$6.275bn in cash and two million shares of AmerisourceBergen Corporation common stock. As part of the transaction, the two companies agreed to extend their existing distribution and partnership agreement, with Alliance Healthcare and Boots UK agreeing to enter into a new exclusive distribution agreement pursuant to which Alliance Healthcare will continue to supply products to the Boots retail business in the UK.

But all of this would be moot if antitrust regulators decided the transaction would adversely affect competition or if the transaction fell afoul of FDI regulations, some of which were newly instigated, largely untested or in the throes of being expanded in scope.

The London competition team led by Suyong Kim and Paul Castlo was antitrust and foreign direct investment counsel to AmerisourceBergen on this transaction, dealing with a number of filings including to the European Commission and demonstrating the importance of providing integrated FDI and merger control advice.

“The transaction faced several challenges. The prevailing geopolitical context meant that the process of obtaining clearances for the transaction coincided with a period of very close scrutiny of the sector by national governments seeking to ensure the security of their supply chains and therefore required very close engagement to navigate potential government concerns in several jurisdictions”, says Charitopoulos.

“Completing the deal involved coordinating numerous regulatory workstreams, from merger control and FDI to sector regulation, to obtain clearances for the transaction in as short a timeframe as possible to enable the parties to devote their attention to their vital role dealing with the market circumstances created by the pandemic. All FDI, sectoral regulatory, and merger control filings, including to the European Commission, were coordinated, and led by the competition team in London.”

The antitrust work on this transaction was facilitated by the global regulatory and compliance work that the firm handles for ABC across its existing business operations. The relationship between Hogan Lovells and AmerisourceBergen begun in 2018 with AmerisourceBergen instructing the firm’s Washington DC life sciences team.

Steadily the relationship expanded to include other offices (most prominently London) and work on antitrust, government contracts and other regulatory matters. “This deal further deepened our team’s relationship with AmerisourceBergen and our understanding of their business and its priorities”, Charitopoulos says. “It was the first time that I had worked for this client, and it was an invaluable opportunity to delve into this industry and AmerisourceBergen’s business at the time of this ambitious, strategic and ultimately transformational deal.”

On a more personal level, he says he learnt invaluable lessons about how to organise and coordinate a team, including local counsel in multiple jurisdictions in a remote working environment. “Working remotely during the pandemic meant that, besides regularly scheduled calls, there were fewer opportunities for informal brainstorming and spontaneous “huddles” after calls to process what had just been discussed. It was therefore important to ensure that everyone in the team felt involved, on top of developments, and comfortable to discuss nuances and questions openly”, he says.

“However, remote working also presented various benefits including increased flexibility and making it easier to include members from various teams and levels in important strategic discussions. The need to innovate in relation to the ways we work also meant that our mindsets were generally geared towards approaching tasks from a fresh perspective and finding new solutions even for existing challenges. Finally, the relative informality imposed by remote working and long lockdowns as well as the sense that we were all facing similar difficulties meant that we built deeper personal relationships within the team as well as with our clients.”

The transaction required a cross-border, multi-practice team to advise AmerisourceBergen across a range of regulatory disciplines including antitrust and FDI. Hogan Lovells was well placed to use the breadth of its regulatory practice to advise AmerisourceBergen on all aspects of the complex regulatory regimes governing an industry which, in the context of the pandemic, has been under intense scrutiny from both governments and the wider public.

The increasing number and complexity of FDI regimes requires careful navigation when planning and executing global M&A transactions. Against this backdrop, FDI filings have become a standard regulatory step towards completion of large M&A transactions. This transaction required FDI filings in France, Romania and Slovenia as well as engagement with FDI authorities in other jurisdictions.

Because of the sensitivity surrounding the healthcare sector, the transaction also required pre-closing sectoral clearance by the Dutch Healthcare Authority (Nederlandse Zorgautoriteit or NZa) pursuant to the Dutch Healthcare (Market Regulation) Act (Wet marktordening gezondheidszorg or Wmg). All FDI, sectoral regulatory, and merger control filings, including to the European Commission, were coordinated, and led by the firm’s competition and antitrust team in London.

For ABC, this is a highly ambitious, strategic, and ultimately transformational deal, enabling it to extend its distribution presence into new locations, potentially increasing revenues and diversifying its geographical presence. As one of the largest pharmaceutical wholesalers in Europe, Alliance Healthcare extends AmerisourceBergen’s core wholesale, distribution, and related solutions capabilities into Europe and North Africa.

It also enhanced AmerisourceBergen’s existing global platform of manufacturer services and strengthened its ability to support global access to pharmaceutical products.

The transaction received approval from all necessary regulatory bodies at various dates including on 29 April 2021, when the EU Competition Commission gave its permission for the deal to proceed, thus allowing it to close on 1 June 2021, having only been announced in early January 2021.

Hogan Lovells’ success in this matter came under the highest pressure: a multi-billion dollar, cross-border deal in an industry that, arguably, has never been under greater public and political scrutiny. As governments all over the world step up scrutiny of all corporate transactions, particularly in the healthcare space where public opinion during an ongoing pandemic plays an important role, this was an outstanding result the firm’s London antitrust team.

“Since the completion of AmerisourceBergen’s acquisition, I have been part of the team advising an international investment company on the sale of a stake in leading luxury leisure business. I have also advised on the merger control implications of the acquisition of an exclusive license over a pharmaceutical drug still under development, which allowed me to put to use the sector-experience I had gained from working on AmerisourceBergen’s acquisition”, Charitopoulos says.

Looking back on his career so far, he says he’s most enjoyed the deals that have raised the most complex substantive issues, particularly when they involve public interest considerations. “However, the deals which I have found the most inspiring were the ones which were truly transformative for our clients and their industries.”