Sycamore Partners to Acquire Walgreens in $10 Billion Deal
Walgreens Boots Alliance said on Thursday that it had agreed to be acquired by Sycamore Partners, a private equity firm, in a $10 billion deal that will take the struggling pharmacy chain out of the glare of public markets.
Walgreens has faced declining prescription reimbursements and falling sales at its retail locations for years — a trend that has hit a number of major pharmacy chains. After rapidly expanding their brick-and-mortar footprint, pharmacy companies now say it’s harder to turn a profit from selling prescriptions, citing pressure from middlemen.
Cautious spending from consumers who have been grappling with inflation, coupled with competition from retail behemoths like Amazon and Walmart, has also dampened pharmacies’ sales of household items ranging from snacks to cleaning supplies.
Walgreens, which owns the Duane Reade chain in the New York City area and the Boots pharmacies in Britain, has been closing stores, with hundreds more set to be shuttered in the years ahead.
The buyout follows a roughly 50 percent drop in the company’s share price in the past year. Its market cap, which peaked over $100 billion in a decade, fell below $8 billion when news of a potential takeover broke. Sycamore agreed to pay $11.45 for each share, which is an 8 percent premium over Thursday’s closing price. The company reported an $8.6 billion net loss for the entire fiscal year 2024, almost triple the loss from the previous year. But it beat earnings and revenue expectations in its most recent reported quarter, which ended in November.
“While we are making progress against our ambitious turnaround strategy, meaningful value creation will take time, focus and change that is better managed as a private company,” Tim Wentworth, the chief executive of Walgreens Boots Alliance, said in a statement on Thursday.
In October, Walgreens said it planned to close about 1,200 of its more than 8,000 stores in the United States over the next three years in an effort to cut costs and change focus. Only about 6,000 of the chain’s stores in the United States were profitable, Mr. Wentworth said at the time.
Shares of Walgreens rose almost 6 percent in post-market trading on Thursday after the sale to Sycamore was announced.
The company said it expected the deal to close in the fourth quarter of 2025. Including debt and potential payouts, the total value of the deal would rise to $23.7 billion.
Other major U.S. pharmacy chains have undergone significant restructuring in recent months. CVS and Rite Aid are closing stores in response to the pressures on the retail pharmacy industry. In 2023, Rite Aid filed for bankruptcy and announced plans to close 154 stores.
But beyond industrywide challenges, analysts have attributed the problems at Walgreens to the company’s own strategies and leadership.
The company’s leadership has been in flux in recent years. Mr. Wentworth was hired by the company in October of 2023 as the drugstore operator faced a weakening retail demand. Rosalind Brewer resigned as its previous chief executive after just a little over two years. Some industry analysts have argued that the chain’s leaders should have focused on improving the consumer experience at its stores and offered private-label products for groceries and other essential items.
Walgreens Boots Alliance was formed 10 years ago, after Walgreens acquired Alliance Boots, a British pharmacy chain and drug wholesaler. At one point, the company considered selling Boots to alleviate financial strain, but ultimately abandoned those plans.
Sycamore, which is based in New York, focuses on consumer and retail investments, though the deal with Walgreens expands its portfolio into health care. The private equity firm purchased Staples, an office supply retailer, for almost $7 billion dollars in 2017. It has also invested in brands such as Hot Topic and Ann Taylor. Walgreens has been the target of other firms in the past. KKR, a private equity firm that is one of the largest in the world, offered to purchase the pharmacy chain for $70 Billion in 2019, according reports at the time.
