Walgreens Seals $10 Billion Take-Private Deal With Sycamore
Walgreens’s almost centurylong run as a public company is coming to an end. The embattled drugstore chain has struck a deal to be taken private by Sycamore Partners in one of the biggest leveraged buyouts in recent memory.
Sycamore has agreed to pay $11.45 a share in cash for Walgreens Boots Alliance, representing an equity value of around $10 billion and 29% above where the stock was trading last year. Shareholders could also receive up to an additional $3 a share down the road, based on proceeds from selling the company’s primary-care assets.
The total value of the deal, including debt and the potential future payouts, would be almost $24 billion. The companies expect the deal to close in the fourth quarter of 2025.
The sale is the culmination of a decade of struggles for a historic American retailer with thousands of pharmacies that are fixtures on neighborhood street corners. The market value of Walgreens Boots Alliance surpassed $100 billion in 2015 but had been battered in recent years. Walgreens originally went public in 1927.
The company’s new owners will now have the chance to fix the business out of the public eye.
“Going private is going to let us be more focused, more nimble, more long-term in our decision-making, in the context of the challenges that we continue to face,” said Chief Executive Tim Wentworth. “That gives us both the time and the ability to focus in a way to transform Walgreens.”
Wentworth, who took over as Walgreens CEO in October 2023, had embarked on a turnaround effort. The company has said it plans to shed around 1,200 stores over three years.
But its shares had generally continued to languish, with investors skeptical about the long-term growth prospects of a company built around the difficult retail-pharmacy business.
Wentworth said the deal is a good one for shareholders and allows them to avoid the risk as the company works to change its trajectory.
The retail struggles
Fixing the company won’t be easy.
Walgreens had failed to stay ahead of forces reshaping retail and healthcare, including the rise of e-commerce and the growing power of the drug-industry players known as pharmacy-benefit managers, which negotiate pricing with pharmacies and manufacturers.
While Amazon.com and others stole business from the front of the Walgreens stores, pharmacy-benefit managers squeezed margins on the prescriptions dispensed at the back of the stores.
The combined assault made the stand-alone retail pharmacy business a tough sell to investors. When the company cut its longstanding dividend, investors grew even more frustrated.
Stefano Pessina, a veteran dealmaker, merged Alliance Boots with Walgreens in 2014 in a bid to cement a global pharmacy behemoth. The combined company was still built on retail pharmacy, though.
Walgreens missed on an attempt to connect with a health insurer, the strategy pursued by rival CVS Health. A later plunge into primary-care clinics also failed to turn the tide.
Pessina stepped down as Walgreens’s CEO in 2021 and remains chairman and the biggest individual shareholder, with about a 17% stake in the company. As part of the deal with Sycamore, Pessina has agreed to roll his stake entirely back into the business and maintain a significant ownership.
Wentworth launched a strategic review after he took over. The new CEO said the takeaway was that retail pharmacy was central, but it needed to change.
Wentworth said Sycamore, which has a long history in the retail business, was the right partner because it brings expertise and a record of overseeing turnarounds. The company will remain based in the Chicago area.
A big bite for Sycamore
The Wall Street Journal first reported in mid-December that Sycamore was in talks for a deal and earlier this week reported that talks were advanced.
The transaction would rank among the largest leveraged buyouts globally in the past decade, at a time when there have been fewer such big deals with public-company valuations and interest rates remaining elevated.
The deal also includes a so-called go-shop period for Walgreens to solicit other potential suitors for 35 days.
Sycamore is a retail specialist but has never tried as big a deal as Walgreens, which will test its strategies. The firm has been discussing splitting up the company’s business divisions and financing them individually, according to people familiar with the matter. It is a playbook Sycamore has followed in the past, including when it bought office-retailer Staples in 2017 for $6.9 billion.
Walgreens includes its namesake Walgreens retail business in the U.S., the UK-based pharmacy chain Boots, the specialty pharmacy group Shields Health Solutions and the U.S. healthcare provider VillageMD.
If Sycamore is successful in shedding the assets of the VillageMD primary-care business, Walgreens shareholders could be paid up to an additional $3 per share, or about $2.7 billion, the companies said Thursday. Wentworth said the idea was to give shareholders a way to benefit from improvements in some of the primary-care businesses, which would ideally be sold at higher values after their operations are bolstered.
Even with the plan to shed assets quickly, the deal is a giant for Sycamore, leading it to tap a number of banks and private-credit firms for funding. There are more than a dozen parties already lined up to provide financing, according to people familiar with the matter.
Walgreens currently has around $9 billion in debt as well as opioid-related liabilities and other items that Sycamore had to account for in the total $23.7 billion price tag.
The Walgreens deal should also offer some hope for dealmakers and private-equity firms that have been sitting on the sidelines and waiting on an M&A rebound. There weren’t any deals announced in the U.S. in February that cleared $10 billion. It was the first month without such a deal since January 2023, according to data provider LSEG.
Centerview Partners served as Walgreens’s lead banker, and the law firm Kirkland & Ellis was the company’s legal adviser. UBS Investment Bank was the lead banker to Sycamore, with Davis, Polk & Wardwell acting as legal counsel. Morgan Stanley also advised Walgreens, and Goldman Sachs, JPMorgan, Citi and Wells Fargo also helped advise Sycamore.
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