KKR to Earn Big Payout From Walgreen-Alliance Boots Deal
Private-Equity Firm on Track to Quadruple Its Investment in the European Pharmacy Giant

Alliance Boots GmbH completed its two-part sale to Walgreen Co. on Wednesday, putting buyout firm KKR & Co. on track to roughly quadruple the cash it invested in the European pharmacy giant.

All told, the sale to Walgreen has put about £4.7 billion ($7.3 billion) in cash and stock in KKR’s pocket, according to a person familiar with the matter. The private-equity firm invested about £1.2 billion when it and other investors, including Alliance Boots Executive Chairman Stefano Pessina, took the company private in 2007 in the largest-ever European buyout.

A big reason for the huge haul: KKR and its co-investors accepted stock as part of the purchase price when Walgreen agreed to acquire Alliance Boots in 2012 in a two-part transaction. Walgreen shares have more than doubled since the takeover was agreed upon that June, adding more than $10 billion to their return.

Walgreen on Wednesday completed the second phase of the transaction, acquiring the 55% of Alliance Boots that it didn’t buy in 2012. Walgreen, the largest U.S. pharmacy chain by stores, also changed its name to Walgreens Boots Alliance Inc., and its stock symbol to WBA from WAG.

The combination creates a pharmacy empire with more than 12,800 locations in 11 countries and a vast drug distribution business. It becomes the largest purchaser of prescription drugs globally, which should boost its leverage in negotiations with drug suppliers.

Walgreen shares have soared since the deal was struck despite a postannouncement dip and a $1.1 billion financial forecasting error earlier in 2014 that prompted a management shake-up and spooked some investors.

The merger’s completion brings KKR closer to capping one of the megadeals it led during the buyout boom that preceded the financial crisis.

Multibillion-dollar buyouts from those years have produced mixed results for KKR. The firm’s bet on Texas power provider TXU Corp. soured, resulting in a massive bankruptcy filing in April. KKR’s leveraged buyout of retailer Dollar General Corp. resulted in the firm making nearly five times its money.

Alliance Boots, which was acquired with cash and debt totaling about $18.5 billion, sits squarely with KKR’s big winners. Buyout firms aim to double their investors’ money on corporate buyouts; making four times invested cash in such deals is rare.

Terms of Walgreen’s acquisition of Alliance Boots remained constant throughout the 2½ years it took to complete, with the U.S. pharmacy chain paying for its European counterpart with $9.3 billion in cash and 227.7 million shares. Yet the economics of the transaction greatly improved for the sellers over that time as Walgreen shares surged.

KKR was poised to do slightly better than double its money when the deal was struck in 2012 and Walgreen shares traded at $31.96. The stock closed Wednesday at $76.20.

KKR said Wednesday it owns about 4.6% of the combined company’s stock.

In all, the Alliance Boots sellers’ take was worth $27.3 billion as of Wednesday. At the time the two-part deal was announced, Alliance Boots was valued at $16.2 billion.

Mr. Pessina, by eschewing cash and taking his share in stock, could turn out to the deal’s biggest winner. The 73-year-old founded Franco-Italian pharmaceutical wholesaler Alliance Sante SA in 1977 and about three decades later merged his company with British pharmacy operator Boots Group PLC.

One of the richest men in Italy, Mr. Pessina is the combined company’s largest shareholder and will serve as its acting chief executive, replacing Greg Wasson , who had been Walgreen’s CEO since 2009 and is retiring with completion of the merger.

Write to Ryan Dezember at ryan.dezember@wsj.com