Walgreens Boots Alliance will be taken private by Sycamore Partners in a $10 billion deal, the companies announced Thursday, marking the end of nearly a century of public trading for the US pharmacy giant.
The move comes after years of financial turbulence that saw Walgreens’ market value plummet from a peak of $100 billion to just $9.3 billion.
Sycamore will pay $11.45 per share, an 8% premium over Walgreens’ closing price of $10.60 on Thursday.
In addition, shareholders could receive up to $3 per share in cash from future monetization of Walgreens’ stake in primary-care provider VillageMD.
The total transaction, including debt and payouts, is valued at approximately $23.7 billion, according to investment bank Leerink Partners.
Amazon, Walmart, eat into Walgreens’ share
Walgreens has struggled to keep pace with changes in the retail pharmacy landscape, losing ground to competitors such as Amazon and Walmart.
While rivals diversified into insurance and prescription management, Walgreens pursued an aggressive expansion strategy, investing billions into acquiring other pharmacy chains, including European giant Alliance Boots.
However, the shift away from brick-and-mortar retail left the company exposed to declining foot traffic and shrinking drug margins.
The company’s market capitalization has fallen by 90% since 2015, and its debt burden has swelled to nearly $30 billion.
Walgreens reported a net loss of $8.6 billion for the 2024 fiscal year, nearly three times the previous year’s losses.
While the company recently surpassed earnings and revenue expectations in its most recent quarter, analysts say the turnaround remains a long-term challenge.
“You have a business that is shrinking, and then you layer on losses and cash burn, all of that was the perfect recipe for what we are seeing today,” said Brian Tanquilut, a healthcare services research analyst at Jefferies in a Reuters report.
Strategic missteps by leadership compounded woes
Walgreens has spent years exploring potential buyers for parts of its business.
In 2019, private equity firm KKR reportedly offered $70 billion to take the company private, but the talks did not advance.
Now, Sycamore’s acquisition comes at a fraction of that valuation.
The company has also suffered from strategic missteps under former CEO Stefano Pessina, its largest single shareholder.
During his tenure, Walgreens’ market capitalization shrank by nearly half, and its expansion strategy failed to yield long-term gains.
The costly $5.2 billion investment in VillageMD, once seen as a path to healthcare diversification, has now become a financial drain and a potential divestment target for Sycamore.
Meanwhile, Walgreens’ main competitor, CVS, has successfully diversified its business beyond retail, acquiring health insurer Aetna for nearly $70 billion in 2018.
Walgreens reportedly considered buying insurer Humana but ultimately abandoned the idea, a move analysts now see as a missed opportunity.
Sycamore’s turnaround strategy
Sycamore, a private equity firm known for acquiring struggling retail brands, has a history of extracting value through cost-cutting measures, store closures, and asset sales.
The firm has previously acquired brands such as Staples, Talbots, and Nine West, often restructuring their operations to improve profitability.
Analysts expect Sycamore to follow a similar playbook with Walgreens, possibly selling off non-core assets like Boots, its UK-based pharmacy chain, and reducing operational costs across its retail footprint.
“Going private makes sense on paper,” said Ann Hynes, an analyst with Mizuho Bank, adding that Walgreens’ operational challenges would likely be better handled without commitments to shareholders.
Deal structure and potential roadblocks
The transaction includes a 35-day “go-shop” period, allowing Walgreens to solicit alternative bids.
However, analysts believe a competing offer is unlikely given the complexity of the deal.
“Given the size and number of moving parts involved—a potential split of the US business, Boots, and Health—we don’t expect a competing bid to emerge,” said Michael Cherny, an analyst at Leerink Partners.
With Walgreens set to go private, the future of its sprawling global operations remains uncertain.
While Sycamore’s takeover provides an opportunity for restructuring, questions remain about whether the firm’s strategy will lead to long-term growth or simply a short-term financial overhaul.
Investors and industry watchers will be closely monitoring the next steps as one of America’s most storied pharmacy chains transitions to a new chapter under private ownership.
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