What Is AmerisourceBergen and Why Does Walgreens Want to Buy It?

A sign is seen at a Walgreens store on February 17, 2010 in Homestead, Florida. Today, Walgreen Co. announced plans to buy another drug store company, Duane Reade, for $618 million in cash. (Photo by Joe Raedle/Getty Images) Joe Raedle Getty Images

On Monday The Wall Street Journal reported that Walgreens Boots Alliance is in talks to buy AmerisourceBergen, in the latest sign of a fast-consolidating, and fast-evolving, health care market.

What is AmerisourceBergen?

AmerisourceBergen abc is a global network of companies that works across the healthcare supply chain to deliver drugs to pharmacies and patients. It acts as a distributor, logistics manager, and even liaison between drug developers and legislators. It is one of the biggest drug distributors in the U.S.

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Why now?

Walgreens’s approach comes on the heels of a flurry of vertical integrations and new entrants in the healthcare field.

In December the drugstore chain CVS Health cvs announced a deal to buy the health insurer Aetna aet , and in January Amazon amzn announced that it would partner with JPMorgan Chase and Berkshire Hathaway to create a new, cheaper healthcare alternative.

Going forward, it may be difficult for Walgreens to compete in the healthcare field without making an acquisition like this one.

Why Amerisource?

For Walgreens wba , acquiring Amerisource looks like a deal made in heaven. The two companies already work closely together. In 2013 they signed an agreement to have Amerisource buy drugs for Walgreens for 10 years. Walgreens then acquired 26% of the company. The COO of Walgreens also sits on the board of Amerisource.

Do investors like the idea?

After news of the talks emerged, AmerisourceBergen shares gained 25% in after-hours trading.

Both companies declined to comment to The Wall Street Journal and other news outlets. They also did not immediately return Fortune‘s request for comment.


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