Walgreens considers going private

Investor interest from private equity circles has prompted Walgreens to consider delisting and going private.

Greg Roumeliotis and Mike Spector had the news for Reuters:

Walgreens Boots Alliance Inc (WBA.O) has been exploring whether to go private following private equity interest in the U.S drug store chain, which has a market value of more than $55 billion, 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 Inc (EVR.N) with exploring whether a transaction can be put together, the sources said, cautioning that a deal is far from certain.

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.

USA Today’s Charisse Jones reported:

The retailer’s shares inched up 2.7% to $61.30 in end-of-day trading Tuesday – a marked difference from its longer trend line this year, in which Walgreens stock dropped 19% by the end of October. The flagging stock price may have piqued the interest of private equity firms. 

In the midst of slim profits from pharmaceutical sales and rising competition from other sellers, Walgreens said last month it would shutter 150 of the clinics it runs by the end of this year. Previously, the retailer said it would shut 200 stores.

The company, the nation’s largest drugstore chain by total locations, will still have nearly 9,400 locations in the USA, and it’s been taking steps to innovate its business.

It offers more comprehensive care in some of its clinics, will partner with weight loss company Jenny Craig to open 100 locations in Walgreens stores, and last month, it debuted on-demand delivery by drone in Christiansburg, Virginia.

Ed Hammond, Kiel Porter, Nabila Ahmed, and Dinesh Nair from Bloomberg wrote, citing sources:

The company has recently held informal talks with private equity firms including KKR & Co., the people said, asking not to be identified because the information is private. Pessina is the largest shareholder in Walgreens Boots, whose businesses range from established retail chains in the U.S. and Europe to the lesser-known pharmacy supplier Alliance.

Deerfield, Illinois-based Walgreens Boots has a market value of about $55 billion and $16.8 billion of debt. At that size, a take-private of the company would top the largest leveraged buyout in history: the 2007 sale of utility TXU Corp. to KKR & Co. and TPG, which was worth about $45 billion including debt, according to data compiled by Bloomberg.

Some of the buyout firms have so far shown reluctance to participate in a deal, the people said. It’s unclear how feasible the transaction would be, and the company could decide against pursuing the idea, the people said.