Walgreens Set for $10 Billion Take-Private Acquisition: What This Means for Investors and Shoppers

What’s Happening:

• Walgreens is set to be acquired by Sycamore Partners, a private equity firm, for $11.45 per share in cash. This deal values the company at around $10 billion.
• Shareholders might see an extra $3 per share if VillageMD, a primary care chain, gets sold as part of the deal. The acquisition is expected to wrap up by the end of the year.

Understanding the Deal:

The overall deal, including debt and other payments, could reach nearly $24 billion. There’s a 35-day window where Walgreens can look for other offers. However, analysts believe finding a better deal might be tough due to the size and complexity of this one.

Talk of Walgreens being sold has been around for months. The retail giant, which has been public for almost 100 years, faces significant challenges in its core pharmacy business. Analysts noted that it’s tough to implement the needed changes while still being publicly traded.

Walgreens has struggled over the years. Its share price has dropped significantly, affected by lower prescription reimbursements and fierce competition from other retailers. In its first quarter results earlier this year, Walgreens reported a hefty operating loss of $245 million, compared to a smaller loss of $39 million a year before.

The company is trying to turn things around by cutting costs and reducing its number of stores. CEO Tim Wentworth announced plans to close around 1,200 locations over the next three years due to underperformance among its 8,700 U.S. stores.

Wentworth pointed out that while they are making progress on their turnaround, significant improvements will take time and work better if the company operates privately. Sycamore Partners is expected to bring in valuable experience for this process.

Walgreens also reconsidered its strategy of jumping deeper into health services. Just before the acquisition news, they hinted at possibly selling VillageMD, a primary care chain that had received big investments from Walgreens.

The U.S. Healthcare segment of the company reported a significant loss of $325 million in the first quarter, despite some progress in VillageMD and the specialty pharmacy side. Walgreens is set to share its second-quarter financial results on April 8.