Sycamore Partners, a private equity firm specializing in retail and consumer investments, has finalized the acquisition of Walgreens Boots Alliance Inc.
The private equity firm is acquiring Walgreens for $11.45 a share, or about $10 billion. The deal between the private equity firm and Walgreens represents a step toward an economic and financial revival for the company, as the company has been struggling financially in recent years.
According to the company’s 2024 fiscal reports, sales increased 6.2% to $147.7 billion. However, the company faced a loss per share of $10.01, an increase of 180.4% compared to the previous year, indicating a decrease in the value of its stock price.
The company’s financial situation is explained by a decrease in consumer spending, a complicated transition out of the COVID-19 pandemic, and an attempt to push into healthcare.
The agreement intends to divide Walgreens into divisions by financing them individually, including the U.S. healthcare provider VillageMD and the U.K. pharmacy chain Boots. Sycamore Partners has previously adopted the same approach with companies like Staples Inc.
Prior to the acquisition, private credit investors planned to provide about $4.5 billion of debt. HPS Investment Partners and Ares Management Corp. are among the private lenders interested in financing the deal. Banks, including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS Group AG, and Wells Fargo & Co. were also interested in financing the deal.
In the past, Walgreens had contemplated going private to save the state of its business. In 2019, KKR & Co., a global private equity and investment company, approached Walgreens with a $70 billion buyout, but it wasn’t successful.
With Sycamore Partners’ acquisition, the company’s value is expected to be at least $20 billion, representing one of the most important leveraged buyout debt deals in the last decade. Private credit investors and banks are competing for shares in the acquisition.
According to an insider, the banks are even talking about keeping a $2 billion first-out share of the loan on their balance sheet, which would indicate that in the event of a problem, the group would be paid out first.
The buyout of Walgreens would also represent an important advancement as the acquisition would improve financial stability and revenue generation.
