A potential take-private deal for Walgreens Boots Alliance led by private equity firm Sycamore Partners could pave the way for a three-way split of the struggling US pharmacy giant, according to a report by the Financial Times.
New York-based Sycamore Partners, known for investing in distressed retail assets, has been engaged in on-and-off discussions for weeks over the financing of a potential deal, which would see longtime shareholder Stefano Pessina retain a significant stake. However, sources familiar with the matter suggest that securing the necessary funding is unlikely to be a major obstacle.
While the initial transaction would take Walgreens private in its entirety, Sycamore’s long-term plan involves separating Walgreens’ three core divisions into distinct businesses with independent capital structures: US pharmacy chain Walgreens; UK-based Boots retail and pharmacy group; and Shields Health Solutions, a specialty pharma unit.
By dividing Walgreens’ diverse businesses, Sycamore could optimise capital structures, streamline operations, and position each unit for a more tailored investment approach.
The company’s shares have experienced significant volatility, complicating negotiations. Walgreens’ market capitalisation currently sits at approximately $9.5bn, down sharply from its $100bn valuation in 2015. The retailer has struggled as competition intensifies, and, in October, it announced plans to close 1,200 stores after reporting a $9bn net loss for fiscal 2024.
Stefano Pessina, Walgreens’ Executive Chair and Former CEO, holds a 17% stake in the company following the 2014 sale of his Alliance Boots business to the US group. He has been a driving force behind discussions, as he looks for a long-term solution to Walgreens’ declining share price.
