Walgreens To Be Acquired In $10B Take-Private Deal

The struggling retail pharmacy chain has agreed to be acquired by private equity firm Sycamore Partners, potentially bringing an end to its nearly 100-year tenure as a public company.

The deal’s total value could reach nearly $24 billion, factoring in debt and future payouts. It also includes a 35-day period during which Walgreens can seek alternative offers. However, given the transaction’s scale and complexity, a competing bid is unlikely to succeed, according to a Thursday note from analysts at Leerink Partners.

Speculation about Walgreens’ sale to Sycamore had been circulating for months. Analysts at TD Cowen, Charles Rhyee and Lucas Romanski, noted in a Thursday report that the move isn’t surprising, as Walgreens’ core retail pharmacy business is in urgent need of transformation—changes that would be difficult to implement in the public market.

Walgreens’ stock price has steadily declined over the past decade due to falling prescription reimbursement rates and intensifying retail competition. In its first-quarter earnings report released in January, the company posted an operating loss of $245 million, a sharp decline from the $39 million loss recorded in the same period the previous year.

As part of its turnaround efforts, Walgreens has been cutting costs and reducing its store footprint. In the fall, the company announced plans to close approximately 1,200 stores over the next three years after CEO Tim Wentworth acknowledged that many of its 8,700 U.S. locations were underperforming.

"While we are making progress on our ambitious turnaround strategy, creating meaningful value will take time, focus, and changes that are better executed as a private company,” Wentworth said in a statement. “Sycamore brings expertise and experience in retail turnarounds, making them a valuable partner.”

Walgreens had also begun retreating from its push into healthcare services. Prior to the Sycamore deal, the retailer had signaled last summer that it was considering selling VillageMD, a primary care chain in which it had invested billions.

The company’s U.S. Healthcare segment reported a $325 million operating loss in the first quarter, despite improved performance from VillageMD and specialty pharmacy business Shields Health Solutions.