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US pharmacy chain Walgreens Boots Alliance is in talks over a sale to a private equity firm, underscoring the rising strains facing the sector.
The Illinois-based group is in discussions with Sycamore Partners, an investment group known for targeting troubled retailers, said two people familiar with the matter.
High inflation, which has pushed down consumers’ disposable income, and rising competition have put pressure on the group’s more than 12,500 locations across the US, Europe and Latin America. The group in October said it would shut 1,200 stores in coming years as it reported a nearly $9bn net loss for its 2024 fiscal year.
Walgreens, which owns the UK’s Boots chain, had a market value of as much as $106bn in 2015, but a share rout pushed that figure down to about $8bn as of Monday’s close. Its stock rose almost 20 per cent on Tuesday after The Wall Street Journal first reported on the negotiations.
The talks with Sycamore highlight how the available options for Walgreens have dwindled since 2019, when the chain was offered $70bn to sell to private equity firm KKR in what would have been the largest private equity transaction.
The more than century old retailer had for decades risen on the public markets, culminating in a global expansion when Walgreens bought Boots for about $20bn in a two-step transaction started in 2012 and completed two years later. But competitors such as Amazon and Target have gradually chipped away at its business, prompting Walgreens to repeatedly try to sell or publicly list Boots to focus on its US operations.
Walgreens last year appointed Tim Wentworth, a former Cigna executive, as chief executive. He took over from previous CEO Rosalind Brewer, who stepped down after a two-year period in which the group’s shares halved and acquisitions of healthcare group Summit Health-CityMD and home-care provider CareCentrix failed to pay off.
US retail pharmacies such as Walgreens and Rite Aid have struggled in the public markets, with the latter filing for Chapter 11 bankruptcy protection in 2023, allowing it to restructure billions of dollars in debt. CVS Health recently added four new board members in a pact with activist investor Glenview Management, although the retailer’s diversification into health insurance and pharmacy benefit management has helped bolster its business.
A deal for Walgreens would be a big bet for Sycamore, which manages $10bn, prompting predictions from analysts that the New York-based buyout firm is likely to need outside partners to take the retailer off of the public market.
Sycamore and Walgreens declined to comment.
It was unclear whether Walgreens would remain in one piece or be hived off into several parts under Sycamore ownership. Regardless, “a restructuring of [Walgreens] would likely be easier outside of public eyes”, Elizabeth Anderson, an analyst at Evercore said.
Sycamore has invested in distressed brick-and-mortar focused retailers including Loft and Hot Topic. In 2017, it bought office supply retailer Staples for $7bn. One of the firm’s senior advisers, John Lederer holds a seat on Walgreens’s board, a role held since 2015.
