Walgreens Boots Alliance has announced it has entered into a definitive agreement to be acquired by an entity affiliated with Sycamore Partners in a deal valued at $23.7 billion.
Sycamore Partners is a private equity firm specializing in retail, consumer and distribution-related investments.
The transaction is expected to close in the fourth quarter of this year, subject to customary closing conditions, including approval by WBA shareholders and after a "go-shop" period.
During the go-shop period, WBA will actively solicit and, depending on interest, potentially receive, evaluate and enter into negotiations with parties that offer alternative proposals. The initial go-shop period is 35 days.
Upon completion of the transaction with Sycamore, WBA's common stock will no longer be listed on the Nasdaq stock market, and WBA will become a private company.
WHY THIS MATTERS
Leveraging WBA's healthcare expertise and Sycamore's established leadership in retail and consumer services, WBA will be better positioned to become the first choice for pharmacy, retail and health services, Walgreens said.
The company will continue to operate under the Walgreens, Boots Duane Reade, No7 Beauty Company and Benavides names. WBA will maintain its headquarters in the Chicago area.
Tim Wentworth, CEO of Walgreens Boots Alliance, said: "While we are making progress against our ambitious turnaround strategy, meaningful value creation will take time, focus and change that is better managed as a private company. Sycamore will provide us with the expertise and experience of a partner with a strong track record of successful retail turnarounds. The WBA Board considered all these factors in evaluating this transaction, and we believe this agreement provides shareholders premium cash value, with the ability to benefit from additional value creation going forward from monetization of the VillageMD businesses."
WBA shareholders will receive total consideration consisting of $11.45 per share in cash at closing of the Sycamore transaction and one non-transferable right to receive up to $3 in cash per WBA share from the future monetization of WBA's debt and equity interests in VillageMD, which includes Village Medical, Summit Health and CityMD.
WBA is currently evaluating a variety of options with respect to its significant debt. The debt owed to WBA by VillageMD as of Feb. 28 is $3.4 billion, Walgreens said.
"For nearly 125 years, Walgreens, and for 175 years, Boots, along with their portfolio of trusted brands, have been integral to the lives of patients and customers. Sycamore has deep respect for WBA's talented and dedicated team members, and we are committed to stewarding the company's iconic brands," said Stefan Kaluzny, managing director of Sycamore Partners.
WBA is expected to release its fiscal year 2025 second-quarter financial results and file its quarterly report on April 8.
THE LARGER TREND
The Wall Street Journal first reported in December that Sycamore was in talks to take Walgreens private. The deal was then considered dead.
In February, the sale was considered on again after CNBC's David Faber said on air that the pharmacy chain may be sold to New York-based private equity firm Sycamore Partners.
Walgreens has suffered losses due in large part to VillageMD. Plans for expansion of the primary care network were scrapped as in late 2023, Walgreens announced a $1 billion cost-cutting initiative. This included the closure of more than 60 VillageMD clinics, a number that grew to 160.
CVS Health has also suffered profit setbacks from operating losses but has been cushioned by its pharmacy benefit manager Caremark, according to Seeking Alpha.
Walgreens has approximately 12,500 locations across the U.S., Europe and Latin America and employs approximately 311,000 people globally.
Email the writer: SMorse@himss.org