Walgreens Boots Alliance (WBA) has agreed to be acquired by an affiliate of private equity group Sycamore Partners in a transaction valued at up to $23.7 billion, the companies said Thursday.
The deal marks the end of a 98-year run as a public company for Walgreens, one of the largest drugstore retailers in the United States. The purchase, which became increasingly likely following reports late last year, highlights the financial challenges facing the company.
Transaction details
Sycamore Partners has agreed to pay $11.45 per share for Walgreens, representing approximately $10 billion. In addition, the private equity firm will pay Walgreens shareholders up to $3 in cash per share from the future sale of Walgreens’ stake in VillageMD, the clinic operator. The total valuation of $23.7 billion includes debt and potential future payments.
Stefan Kaluzny, Managing Director of Sycamore Partners, commented: «This transaction reflects our confidence in WBA’s pharmacy-led model and its essential role in driving better outcomes for patients, customers and communities.»
¿ What will happen to VillageMD?
Walgreens has said it will continue to evaluate various options regarding its debt and equity interests in VillageMD. Sycamore Partners may reportedly consider selling other parts of the company following the acquisition.
Continuity in direction
WBA CEO Stefano Pessina, who owns a 17% stake in the company, will remain a shareholder after the acquisition.
The $11.45 per share price represents a 29% premium to Walgreens’ closing stock price of $8.85 on Dec. 9, 2024, the day before rumors of the transaction first surfaced.
Closing process and possible alternative proposals
The acquisition is expected to close in the fourth quarter of 2025, subject to regulatory and shareholder approvals. Additionally, a 35-day period has been established in which Walgreens, with the assistance of its financial advisor Centerview Partners, may consider alternative proposals.
In the meantime, Walgreens will continue to operate under its Walgreens and Boots brands, and will maintain its headquarters in the Chicago area, the companies said.
The decline of a retail giant
El The $10 billion price tag reflects a dramatic 91% decline from its peak valuation of $106 billion in 2015, according to a Wall Street Journal report. Despite this, the sale is considered one of the largest leveraged buyouts of the past decade.
Walgreens, once considered a retail giant, has seen its sales decline as consumers have turned to other channels, especially online retailers like Amazon, to purchase consumable goods. Additionally, its profits have been pressured by declining reimbursement rates from pharmacies.
The impact of reimbursement rates
According to Michael Cherny, an analyst at Leerink Partners, prescription drug reimbursement rates represent “the biggest issue” for Walgreens, especially since the company did not partner with a health insurer or pharmacy benefit manager, as competitor CVS Health did.
Instead of partnering with these entities, Walgreens opted for the acquisition of Boots in 2012 (completed in 2014) and an investment in VillageMD in 2020, seeking to diversify its focus and become a destination for a broader range of health care services.
Recent strategies to revitalize the company
In recent years, Walgreens has taken aggressive steps to revitalize its operations, including scaling back its health clinic operations, announcing the closure of 1,200 stores and rethinking its retail strategy.
«Better managed as a private company»
Tim Wentworth, CEO of Walgreens Boots Alliance, said: «While we are making progress on our ambitious turnaround strategy, creating significant value will require time, focus and change that is best managed as a private company.»
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