Walgreens Nears Roughly $10 Billion Deal to Go Private

Walgreens Boots Alliance Inc (NASDAQ:WBA) is nearing a deal worth around $10 billion to take the struggling pharmacy chain private, according to reports from the Wall Street Journal and the Financial Times. The potential buyout, led by private equity firm Sycamore Partners, could be finalized as early as early-2025, with a finalized agreement expected to be signed soon. The deal, if completed, would mark a significant turnaround for Walgreens, which has been grappling with sluggish sales and intense competition in the retail pharmacy sector.

The proposed buyout comes as Walgreens is in the midst of a turnaround plan aimed at curbing costs and improving cashflows. The company has been struggling with weak consumer spending, sticky inflation, and lower margins in its pharmacy business, leading to a significant slump in its stock price. Walgreens shares have fallen over 60% so far in 2024, and the company's market capitalization has shrunk to around $9 billion. The potential buyout, if successful, could provide Walgreens with the necessary capital and strategic direction to execute a more effective turnaround plan.

The proposed deal also involves the potential carving out of the Alliance Boots UK business, which Walgreens acquired in 2015. The WSJ report suggests that the UK business may be separated from the US Retail and Healthcare businesses, with each business unit having its own capital structure and management team. This three-way split could help Walgreens improve focus, accountability, and decision-making, as each unit can tailor its strategies to its specific market and customer base.



However, the proposed deal is not without its challenges and risks. Financing the deal is a significant hurdle, with reports suggesting that there have been issues with securing sufficient funding at an acceptable cost. Additionally, the success of the deal hinges on the private equity firm's ability to execute a more effective turnaround plan than the current management team. The potential carving out of the Alliance Boots UK business could also lead to complexities in the separation process and potential disruptions in operations.

In conclusion, the proposed $10 billion deal to take Walgreens private could be a game-changer for the struggling pharmacy chain. If successful, the deal could provide Walgreens with the necessary capital and strategic direction to execute a more effective turnaround plan and improve its market position in the retail pharmacy sector. However, the deal is not without its challenges and risks, and the success of the deal will depend on various factors, including the ability to secure financing, execute a more effective turnaround plan, and navigate the complexities of the proposed three-way split.