Walgreens Boots Alliance in Talks to Sell to Sycamore Partners

By Anirban Sen and Leroy Leo
(Reuters) – Walgreens Boots Alliance (NASDAQ:WBA) is in discussions to sell itself to private equity firm Sycamore Partners, according to a source familiar with the situation. This marks the latest attempt by the pharmacy chain operator to go private following a significant decline in share value.

Walgreens has collaborated with its advisers in recent weeks and reached out to other prospective buyers; however, it is presently in discussions solely with Sycamore, the source noted.

A potential agreement is anticipated to be finalized by early next year, the source indicated. Both Walgreens and Sycamore opted not to comment on the matter.

Following this news, shares of the second-largest U.S. pharmacy chain surged nearly 23% in afternoon trading.

If the negotiations prove successful, it would represent Sycamore's largest deal, as Walgreens has an approximate valuation of $8 billion. Additionally, as of August 31, the pharmacy chain operated with long-term debt totaling $8.04 billion.

Walgreens previously attempted to go private in 2019, boasting a valuation exceeding $55 billion, but was unsuccessful. At that time, private equity group KKR also approached the drugstore chain with a buyout proposal, per media reports.

The retail segment of Walgreens has struggled with diminishing consumer spending amidst persistent inflation, and its pharmacy operations have encountered low reimbursement rates for prescription filings.

Furthermore, the company runs the Boots retail and pharmacy chain in the UK, which it has been trying to sell for several years.

Last year, Walgreens underwent management changes with CEO Rosalind Brewer stepping down abruptly in September. Healthcare veteran Tim Wentworth succeeded her and has since declared the dismissal of numerous mid-level executives, outlined a $1 billion cost-cutting strategy, and announced the closure of 1,200 stores over the next three years.

To date, Walgreens’ stock has plummeted more than 60% this year, as of Monday.

Analyst Michael Cherny from Leerink expressed that he was not surprised by the reported discussions, indicating that Walgreens has explored various avenues amidst a decline in earnings.

The Wall Street Journal initially reported the news.