In a significant financial move, Walgreens Boots Alliance Inc. has entered into an agreement with Sycamore Partners to go private in a transaction valued at $10 billion. This development transforms one of the most historic and well-known drugstore chains in the United States into a private entity.
Sycamore Partners will acquire Walgreens at $11.45 per share, marking an approximate 8% premium over the company’s recent closing price. Following the announcement, Walgreens’ stock saw a 5.7% increase in after-hours trading. Analysts note that while the purchase price is notable, it reflects a substantial drop from Walgreens’ peak valuation of over $90 billion a decade ago. The company has faced challenges from growing online retail competition and stringent reimbursement policies from insurers, which have largely contributed to its decreased market value in recent years.
The acquisition is expected to finalize in the fourth quarter of 2025. Included in the terms is a 35-day ‘go-shop’ period, providing Walgreens the opportunity to seek and consider other potential offers. This decision comes amid skepticism from investors regarding Walgreens’ ability to find a buyer, considering its financial obligations, including approximately $8 billion in debt and $22 billion in lease commitments.
Sycamore Partners, known for its focus on retail and consumer sectors, brings experience with various brands such as LOFT and Ann Taylor. The acquisition is seen as a strategic move that allows Walgreens to restructure without the immediate pressures of public market demands. Executives suggest this could lead to long-term strategic shifts, potentially involving closures and divestments aimed at sustainability.
CEO Tim Wentworth has already initiated store closures and asset sales. Walgreens also suspended its longstanding quarterly dividend, a move seen as necessary to conserve cash flow. Plans are underway to divest the company’s interest in VillageMD, a chain of health clinics, which has already led to a $5.8 billion write-off. Under the deal, shareholders could receive up to an additional $3 per share from future monetization of Walgreens’ stakes in VillageMD.
Stefano Pessina, Executive Chairman and a significant shareholder, intends to reinvest his proceeds from the buyout into the new structure, maintaining a considerable equity stake. The strategic pivot towards private ownership marks a departure from Pessina’s previous ambitions of expanding Walgreens into a major healthcare conglomerate.
Financial advisors for the transaction include Centerview Partners and Morgan Stanley for Walgreens, with UBS Investment Bank and Goldman Sachs advising Sycamore Partners. This transaction illustrates a broader trend in the industry where traditional retailers are adapting to changing market dynamics.
Walgreens’ transition to private equity ownership under Sycamore Partners is a testament to the shifting landscape of retail pharmacy amidst evolving market pressures. As the company navigates this new phase, it aims to regain stability and focus on strategic growth without the constraints of public market scrutiny.
