Retail pharmacy chain Walgreens could be sold to private equity firm Sycamore Partners early next year, taking the publicly traded company off the market, according to a report by the Wall Street Journal.
Citing unnamed sources, the report noted that if the deal is successful, Sycamore would sell off parts of the company or work with partners in the deal.
Walgreens Boots Alliance, headquartered in Deerfield, Ill., has been eyed by private equity firms for years and was targeted by private equity firm KKR in 2019. At that time, Walgreens had a market capitalization of more than $56 billion and held almost $17 billion in debt.
News of the talks with Sycamore sent Walgreens Boots Alliance stock up by more than 18% to a high of $11.12 per share on Tuesday. That follows a precipitous year-over-year decline over the last 12 months from a high of $27.05 and a low of $8.08 per share.
Sycamore’s most recent major deal was the $7 billion purchase of office supply chain Staples in 2017, said the report.
Walgreens has had multiple rounds of layoffs over the last year and announced in October that it will close 1,200 stores over the next three years to right the ship. Those closures have already begun, with nearly 60 locations closing over the last month.
CEO Tim Wentworth said in the pharmacy retailer’s October quarter earnings call that approximately 6,000 of its 8,000 stores are profitable.
“Fiscal 2025 will be an important rebasing year as we advance our strategy to drive value creation,” Wentworth said. “This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”
Neil Saunders, managing director and retail analyst at GlobalData Retail, told Supermarket News that Walgreens’ tailspin leaving the pharmacy chain with “few options” for rapidly turning the company around, calling a possible sale to private equity an “elegant solution.”
“If the deal goes through, Sycamore Partners would acquire a sprawling business empire that they could, with some effort, fashion into a more disciplined operation,” Saunders said. “They would also have the possibility of selling off parts of the business, such as Boots, to maximize their return.”
Saunders noted that Walgreens is a “big company with big problems” and requires a long-term investment.
“Cuts would most certainly be on the agenda, but the pathway to grow would be more challenging as the healthcare, pharmacy and retail sides of the business all have inherent problems that are not easily soluble,” he said. “The size of a deal would be significant, although the dramatic decline in Walgreens market capitalization means that it is one Sycamore could likely afford. “The decision they need to make is whether there is enough fuel left in the tank of Walgreens to allow it to be piloted on a course to success.”
A version of this story first appeared in CSP sister publicationSupermarket News.
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