As its retail and pharmacy divisions struggle, Walgreens Boots Alliance shares have lost half their value in the past year.
Walgreens Boots Alliance announced on Thursday that it would be acquired by private equity company Sycamore Partners for $10 billion, removing the faltering pharmacy giant from public markets.
Walgreens and other big pharmacy companies have seen diminishing prescription reimbursements and sales for years. After rapidly increasing their brick-and-mortar reach, pharmacy companies say middlemen make it tougher to offer prescriptions profitably.
Consumers' cautious spending due to inflation and competition from Amazon and Walmart has also slowed pharmacies' sales of food and cleaning goods.
Walgreens, which owns Duane Reade in New York City and Boots in Britain, is closing shops, with hundreds more planned.
After a 50% share price reduction in a year, the takeover was announced. Before the buyout announcement late last year, its market value sank to $8 billion from over $100 billion a decade earlier. Sycamore will pay $11.45 per share, an 8% premium over Thursday's closing price.
Chain strain has been evident for months. The corporation lost $8.6 billion in the 2024 fiscal year, roughly quadruple the previous year. However, its November quarter earnings and revenue exceeded projections.
“While we are making progress against our ambitious turnaround strategy, meaningful value creation will take time, focus, and change that is better managed as a private company,” Walgreens Boots Alliance CEO Tim Wentworth said Thursday.
Walgreens announced in October that it would eliminate 1,200 of its 8,000 US stores over the next three years to slash expenses and shift emphasis. Just 6,000 of the chain's US locations were profitable, Mr. Wentworth claimed.
The Sycamore deal boosted Walgreens shares by over 6% after the market closed on Thursday.
The company expected the purchase to be finalized in Q4 2025. The deal would be worth $23.7 billion with debt and dividends.
Large U.S. pharmacy chains have restructured in recent months. CVS and Rite Aid have begun shop closings amid retail pharmacy sector pressure. Rite Aid declared bankruptcy in 2023 and closed 154 stores.
Beyond industrywide issues, analysts have blamed Walgreens' strategies and leadership.
The company's leadership has changed recently. Mr. Wentworth joined the drugstore operator in October 2023 as retail demand fell. After two years as CEO, Rosalind Brewer resigned. Some observers say the chain should have focused on customer service and private-label groceries and other essentials.
Walgreens bought Alliance Boots, a British pharmacy chain and medicine wholesaler, 10 years ago. The business considered selling Boots to reduce debt but decided against it.
New York-based Sycamore invests in consumer and retail, but the Walgreens deal increases its healthcare portfolio. In 2017, the private equity group bought Staples for roughly $7 billion and invested in Hot Topic and Ann Taylor.
The acquisition may involve selling Walgreens assets or partnering with the company. Other companies have shown interest in buying Walgreens. In 2019, KKR, a major private equity firm, proposed $70 billion to buy the pharmacy chain, according to sources.
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