Walgreens to be taken private by Sycamore Partners in $10B deal

Walgreens Boots Alliance will be taken private by Sycamore Partners for $10 billion, the buyout firm said on Thursday, closing out nearly a century of trading on public markets for the US pharmacy giant.Sycamore will pay $11.45 per share, a premium of 8% to the stock’s closing price of $10.60 on Thursday.Shares of the company rose nearly 6% in extended trading.Walgreens shareholders could also receive an additional $3 in cash from future monetization of the company’s debt and equity interests in VillageMD.The company’s market value has shrunk to just more than $9 billion from almost $100 billion a decade ago as margins on drug prices fell and consumers shifted to cheaper rivals Amazon and Walmart to fill their prescriptions and purchase toiletries.And when rivals diversified into insurance or prescription management, Walgreens invested billions buying other pharmacy chains despite the trend away from in-store shopping.As a result, the second-largest US pharmacy chain’s debt and lease obligations have ballooned to almost $30 billion.“You have a business that is shrinking, and then you layer on losses and cash burn, all of that was the perfect recipe for what we are seeing today,” said Brian Tanquilut, a healthcare services research analyst with Jefferies bank.Sycamore Partners, a private equity firm that specializes in retail and consumer investments, has a track record of acquiring distressed retailers for profit: among them were brands such as Staples, Talbots and Nine West.Its past approach has involved selling the companies’ most valuable assets, and reducing costs in the remaining operations through store closures and other measures, with savings often used to draw dividends and not necessarily aimed at growth.“Going private makes sense on paper,” said Ann Hynes, an analyst with Mizuho Bank, adding that Walgreens’ operational challenges would likely better be handled without commitments to shareholders.Walgreens has been suffering ...