PE firm Sycamore to acquire Walgreens in US$23.7b deal
Private equity firm Sycamore Partners has reached an agreement to take Walgreens Boots Alliance private, in a transaction valued at up to US$23.7bn ($37.5bn). This deal marks the end of Walgreens' 97-year history as a publicly listed entity.
Transaction snapshot
Deal value: Up to US$23.7bn ($37.5bn)
Deal multiples: ~0.16x revenue
Deal type: Take-private transaction
Investors: Sycamore Partners, Stefano Pessina (existing minority shareholder)
Sycamore will pay US$11.45 ($18.09) per share, reflecting a premium of nearly 30 per cent on the Walgreens stock price before initial reports of negotiations surfaced in December. The agreed equity value totals approximately US$10bn ($15.8bn).
Under the agreement, Walgreens shareholders could also receive an additional US$3 ($4.74) per share, contingent on the sale of Walgreens' primary care division, VillageMD. Including debt, the transaction's total valuation could reach as much as US$23.7bn ($37.5bn).
Stefano Pessina, Italian billionaire, executive chair, and largest shareholder of Walgreens, will retain a significant minority interest in the company. Currently holding a 17 per cent stake, Pessina orchestrated the 2014 merger of US-based Walgreens and Europe-based Alliance Boots, leading the combined group as CEO from 2015 to 2021.
Sycamore reportedly intends to retain Walgreens' US retail operations. It is expected to spin off or sell the company's other segments, including Boots pharmacies in the UK, in a three-way split.
Walgreens owns and operates thousands of stores in the US, including Walgreens and Duane Reade pharmacies. The company generated revenues of US$148bn ($233.8bn) in its most recent financial year.
Walgreens' market value exceeded US$100bn ($158bn) shortly after its 2014 merger but has since dropped to under US$10bn ($15.8bn). This decline resulted from competition from ecommerce and decreasing reimbursement rates from pharmacy benefit managers.
In late 2019, Walgreens rejected a take-private bid from KKR, which valued the company at more than US$70bn ($110.6bn). Walgreens subsequently expanded into healthcare, acquiring a controlling stake in VillageMD for US$5.2bn ($8.2bn) in 2021. VillageMD later acquired Summit Health-CityMD for US$8.9bn ($14.1bn). Walgreens has sought to sell VillageMD for over a year.
Walgreens' current CEO, Tim Wentworth, stated that the company's turnaround strategies could be better executed under private ownership. He highlighted Sycamore's strong track record in retail turnarounds.
Sycamore Partners, which manages approximately US$10bn ($15.8bn) in assets, previously completed a high-profile acquisition of Staples for US$7bn ($11.1bn). Sycamore has secured over US$10bn ($15.8bn) in debt financing from banks and private credit lenders, including Ares Management, HPS Investment Partners, JPMorgan Chase, and Goldman Sachs.
According to sources familiar with the deal, financing arrangements are complex. Individual financing will cover Walgreens' three separate business units. Debt for the challenged US Walgreens business will be secured against inventories, including prescription stock.
As part of the transaction terms, Walgreens will have a 35-day period to explore and entertain competing offers. The company intends to maintain its existing headquarters in the Chicago area.
