Walgreens Boots Alliance (WBA) is reported to be in discussions about selling itself to private equity firm Sycamore Partners in a deal that would value the pharmacy giant at up to $10bn.
The attempt to take the business private comes after a sharp slump in WBA’s share value following a difficult period in its core US market. The company is said to have been working with its advisers over the past few weeks and has also reached out to other potential buyers but is currently only in talks with Sycamore.
Sources suggested that a potential deal could be signed early next year. The prospect of a sale, first reported by The Wall Street Journal, boosted WBA’s shares by more than 20% in late trading yesterday.
WBA had previously attempted to go private in 2019 when it was valued at more than $55bn but was unsuccessful. And earlier this year, a second attempt to offload its Boots unit in the UK failed. Analysts suggested that a private equity takeover of WBA could trigger a fresh auction of the British high street chain.
Sycamore currently owns US stationery chain Staples, which it bought for $7bn in 2017, and the American restaurant chain Playa Bowls.
Whilst Boots has seen a resurgence in performance since the pandemic, WBA’s retail business in the US has struggled amid weak consumer spending following the prolonged period of high inflation. Its pharmacy operation has also faced low reimbursement rates for filing prescriptions.
The company recently confirmed it will shut 1,200 of its 8,000 stores in the US as part of a turnaround plan instigated by CEO Tim Wentworth. He has unveiled a series of changes since taking on the top job last year, including the removal of multiple mid-level executives and a $1bn cost-cutting programme.
NAM Implications:
- If this deal goes ahead, a price of approx $10bn will be paid using money borrowed at approx 5% per annum.
- The purchase price is based on WBA’s latest market capitalisation of $10bn.
- Following the disclosure of interest in WBA…
- …a PE owner will be looking at releasing value…
- …via the sale of assets…
- …and cuts…
- …and driving the rest of the business hard.
- Anticipate Boots being put up for sale, fast…
