Walgreens shares jumped 20% on Tuesday on a report that the pharmacy giant is in talks to go private – at a small fraction of the price the company’s stock fetched less than a decade ago.
Walgreens Boots Alliance and Sycamore Partners – a buyout firm whose past acquisitions include Staples, Talbots and Aeropostale – have been discussing a deal that could be completed early next year as long as talks do not fall apart, according to The Wall Street Journal.
Since hitting its 2015 peak of more than $100 billion, Walgreens’ market value has fallen to around $7.5 billion. Its shares have dropped 90% in the same period – down about 65% just this year.
The deal is a major win for Sycamore, which would likely sell off parts of the Walgreens business or work with partners, a source told the Journal.
Walgreens – a 120-plus-year-old company with more than 12,000 stores across the US, Latin America and Europe, according to its website – has long been eyed as a possible private-equity acquisition, though its size seemingly put it out of bounds.
Buyout giant KKR reportedly made a $70 billion offer for the pharmacy giant in 2019, when the company’s market was more than $50 billion.
Walgreen’s troubles started in 2012, when Walgreens paid more than $6 billion for around half of Alliance Boots, which owns Boots pharmacies in the UK. It completed the merger in 2015, but financial strains have pushed Walgreens to explore a possible sale of the UK pharmacy chain.
The chain has also been struggling to compete with mounting competition from Walmart and Amazon, as well as stock-still margins on prescription drugs. It’s not alone – rival CVS has seen its shares fall 32% so far this year.
While CVS has attempted to expand its business, acquiring insurance company Aetna in 2018, Walgreens has remained largely in the pharmacy sector.
Walgreens CEO Tim Wentworth has been trying to turn around the company since he took the helm in October 2023, a rocky start after pharmacy staffers had walked off the job the week before to protest staffing shortages.
Under Wentworth, Walgreens over the summer announced it would be closing underperforming stores and cutting its stake in VillageMD to backtrack on its move into the primary-care sector.
One of Sycamore’s last sizable deals was its nearly $7 billion acquisition of Staples in 2017. The firm also reportedly expressed interest in buying Kohl’s in 2022.
Some of the firm’s current investments include Belk, Hot Topic, Talbots, Aeropostale and Stuart Weitzman.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
