Walgreens Boots Alliance has been exploring whether to go private following private equity interest in the US pharmacy chain, which has a market value of more than $55bn, according to people familiar with the matter.
In recent months, Walgreens has held preliminary discussions with some of the world’s largest private equity firms about putting together what would be the biggest ever leveraged buyout, the sources said.
Walgreens has tasked investment bank Evercore Partners with exploring whether a deal can be put together, the sources said, cautioning that a deal is far from certain.
Walgreens shares rose eight per cent to $64.12 in New York after Reuters was first to report the news this evening. It later gave back some of those gains and was up about four per cent. The stock had lost 28 per cent of its value in the last 12 months, compared to a 13 per cent rise in the S&P 500 index.
Many private equity firms have pushed back on the idea, concerned about Walgreens’ business prospects and the challenges of financing the deal, the sources added.
A leveraged buyout of Walgreens would likely require participation of several private equity firms, each writing large checks, at a time when many of them have lost their appetite for teaming together on so-called club deals. Many of those takeovers were completed during a boom preceding the 2008 financial crisis and subsequently struggled or collapsed.
Walgreens chief executive Stefano Pessina, who is the company’s largest shareholder with a 16 per cent stake, could roll his equity into the deal to help finance the transaction, one of the sources said.
Walgreens also has also contemplated divesting some of its assets, such as its 27 per cent stake in drug wholesaler Amerisource Bergen, to provide more funding, one of the sources added.
The sources asked not to be identified because the matter is confidential. Walgreens and Evercore declined to comment.
Walgreens’ deliberations over going private reflect the challenges its business faces.
Last week, it warned it did not expect its adjusted earnings to grow in fiscal 2020 because of the low reimbursement rates for prescription drugs, especially generics, and competition from online retailers such as Amazon.
The Deerfield, Illinois-based company, which operates Walgreens and Duane Reade pharmacies in the United States and Boots in Britain, has been closing stores and launching cross-selling partnerships with companies such as grocer Kroger and weight loss clinic operator Jenny Craig, as it seeks to cut costs and boost its growth prospects.
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