Walgreens Boots Alliance Sees Stock Drop Amid Acquisition Doubts

Shares of Walgreens Boots Alliance (NASDAQ:WBA) Inc. fell over 6% as analysts cast doubt on a successful acquisition by Sycamore Partners. This decline follows a previous surge of up to 28% on Tuesday, fueled by reports of potential sale discussions with the private equity firm.

Analysts from Leerink, holding a market perform rating, pointed out the complexity surrounding the situation. Michael Cherny emphasized various factors affecting free cash flow generation, complicating any straightforward conclusions about the acquisition. He suggested that asset divestitures or real estate monetization might be involved, although he noted the challenges from Walgreens’ earlier sale-leaseback transactions.

Morgan Stanley (NYSE:MS) also chimed in, with analyst Erin Wright, who maintained an underweight rating, questioning the feasibility of the buyout amidst a challenging pharmacy environment. Wright highlighted Walgreens' substantial debt and limited cash flow as significant barriers to achieving value creation through this transaction.

Additionally, Raymond James, also assigning a market perform rating, expressed surprise at the sale discussions given Walgreens' financial outlook. The firm’s analyst noted financing difficulties due to declining earnings, cash flow prospects, and around $15 billion in liabilities, which include net debt and costs related to opioid settlements and store closures.

On a more optimistic note, TD Cowen, which maintains a buy rating on Walgreens, highlighted a potential takeover possibility. Analyst Charles Rhyee pointed out the uncertainty surrounding what a private equity firm could do to expedite Walgreens' turnaround. His analysis suggests that confidence in improving the U.S. Retail segment's performance would be crucial for a private equity firm to align with or surpass the management's plans.

Investors and market watchers are keeping a close eye on developments, particularly regarding the implications of any acquisition on Walgreens' future operations and financial health.

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