Walgreens Boots Alliance is going private in a deal worth up to $23.7 billion. This decision comes after a challenging time in the public markets, where the company lost a significant amount of its value, along with closing more than 10% of its locations.
This marks an end to nearly 100 years of being a publicly traded company. Walgreens went public in 1927, just after opening its 100th store in Chicago.
Private equity firm Sycamore Partners will buy the company for $11.45 per share in cash. If we include debt and potential future payouts, the total might reach $23.7 billion.
Over the last five years, Walgreens’ stock has dropped nearly 80%, although it has seen some improvement recently as talks about going private emerged.
Sycamore focuses on consumer and retail services and plans to continue operating from the Chicago area.
CEO Tim Wentworth expressed optimism about the future, stating that while the company is making progress in its turnaround strategy, being private will allow for more focused management and change. Sycamore’s experience in retail turnarounds will be beneficial.
Walgreens, like its competitors CVS and Rite Aid, has closed many stores and faced declining profits due to lower prescription reimbursements. Its market value has plummeted from around $100 billion a decade ago to roughly $9.5 billion now.
Compared to CVS, Walgreens is smaller, making it harder to negotiate favorable prices with health insurers. This has put it at a disadvantage.
In October, Walgreens announced it would close about 1,200 locations, which is a significant increase from a previous plan to shut 300 underperforming stores. Currently, the company has about 8,500 locations in the U.S.
In its acquisition history, Walgreens took over the Duane Reade chain in 2010 and bought the remaining stake in Alliance Boots for $5.3 billion in 2014.
Stefano Pessina, the executive chairman, remains the largest shareholder with a 17% stake and is committed to reinvesting in the company.
Analysts view the deal as a strategic way to enhance value for investors. Some predict that Sycamore might even sell off parts of the business, like the UK chain Boots, to optimize returns.
The challenges facing Walgreens are significant. The company must navigate lower reimbursement rates and stiff competition from online retailers like Amazon. Unlike CVS, which aligned with a health insurer, Walgreens has focused on acquisitions that require heavy investments, like the VillageMD clinics.
With the growth of larger retailers like Target and even Dollar General, Walgreens also faces pressure in front-end retail sales. The company plans to close the transaction by the fourth quarter of 2025, marking a new chapter in its long history.
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