Walgreens' Breakup Nearby

Shares of Walgreens Boots Alliance climbed nearly 5% in premarket trading following a report in The Wall Street Journal that the struggling drugstore chain plans to sell itself to Sycamore Partners for $10 billion. The report said the deal could be announced as soon as Thursday.

Sources familiar with the deal told WSJ that Sycamore would pay between $11.30 and $11.40 per share in cash to take the pharmacy chain private, following a decade of crashing stock value.

Walgreens’s market value peaked at $100 billion in 2015 but collapsed to less than $8 billion late last year. WSJ first revealed Sycamore’s interest in Walgreens in early December, which sent shares bouncing off a 28-year low.

Walgreens Shares Spike Off 28-Year Lows On Private-Equity Interest; Report https://t.co/vaL8wbpNEa

— zerohedge (@zerohedge) December 10, 2024

The struggling pharmacy chain has faced a decade of sliding margins in its core prescription business after it doubled down on its retail pharmacy operations. Meanwhile, competitor CVS Health diversified into insurance and pharmacy benefits. A move into primary care failed to reverse its fortunes.

WSJ noted that Sycamore would take Walgreens off the public market in the deal, likely leading to the pharmacy chain’s breakup. This means that Sycamore keeps its core US retail business while selling off other parts of the company, including British pharmacy chain Boots, U.S. healthcare provider Village MD, US drugstore chain Duane Reade, and No7 Beauty Co.

Last week, Deutsche Bank analyst George Hill noted that Walgreens shares had risen too much in anticipation of Sycamore’s acquisition and assigned a $9 price target.

„The deal strikes us as incredibly complicated and unlikely to be consummated at a premium to the current share price,” Hill told clients.

The latest data from the pharmacy chain shows 12,500 locations worldwide and employs about 312,000 people.

Walgreens has previously explored going private. In 2019, private equity firm KKR made a $70 billion offer for the pharmacy chain when Walgreens had a market value of over $50 billion. That valuation has since plunged to approximately $8.9 billion.