The Walgreens Boots Alliance said Thursday that private equity company Sycamore Partners has agreed to acquire it in a $10 billion deal.
For years, Walgreens has faced declining prescription refunds and sales at retailers. This is a trend that has hit many major pharmacy chains. After rapidly expanding its brick and mortar footprint, pharmacy companies now cite pressure from intermediaries, saying it's difficult to make a profit from selling prescriptions.
Coupled with competition with retailers like Amazon and Walmart, careful spending from consumers who have been working on inflation has also weakened sales of pharmacy household goods, from snacks to cleaning supplies.
Walgreens, which owns the Duane Reed chain in New York City and the UK boot pharmacy, is set to close hundreds of more years ago.
The acquisition follows a roughly 50% decline in the company's share price over the past year. The market value, which peaked at over $100 billion a decade ago, fell below $8 billion before news stories that could have broken for the first time in the second half of last year. Sycamore agrees to pay $11.45 per share, an 8% premium from the share price on Thursday.
Signs of tension in the chain were clear for several months. The company reported a net loss of $8.6 billion for the entire fiscal year 2024, almost tripling its losses the previous year. However, it beat revenue and revenue expectations in the most recent reporting quarter that ended in November.
“While we advance against ambitious turnaround strategies, meaningful value creation will require time, focus and change to be better managed as a private company,” Tim Wentworth, CEO of the Walgreens Boots Alliance, said in a statement Thursday.
In October, Walgreens said it plans to close around 1,200 of its more than 8,000 stores in the US over the next three years to cut costs and change focus. At the time, Wentworth said only 6,000 people were earning from the US chain's stores.
Walgreens shares rose nearly 6% in post-market trading on Thursday after the sale to Sycamore was announced.
The company said it expects trading to close in the fourth quarter of 2025. The total transaction, including debt and potential payments, will rise to $23.7 billion.
Other major US pharmacy chains have undergone major restructuring in recent months. CVS and Rite Aid have launched a round of store closures, in signs of pressure across the retail pharmacy industry. In 2023, Rite Aid filed for bankruptcy and announced plans to close 154 stores.
But beyond industry-wide challenges, analysts attribute Walgreens' problems to the company's own strategy and leadership.
The company's leadership has become more fluid in recent years. Wentworth joined the company in October 2023. This is because drugstore operators faced weakening demand at retailers. Former CEO Rosalind Brewer resigned in the post more than two years later. Some industry analysts argue that chain leaders should focus on improving the consumer experience in stores, and that private label products should be provided for groceries and other important items.
The Walgreens Boots Alliance was formed 10 years ago after Walgreens acquired the UK pharmacy chain and drug wholesaler Alliance Boots. At one point, the company considered selling boots to alleviate financial tensions, but ultimately abandoned those plans.
New York-based Sycamore focuses on consumer and retail investments, but its contract with Walgreens expands its portfolio to healthcare. The private equity company bought Office Supply Retailer Staples for almost $7 billion in 2017 and invested in brands such as Hot Topic and Ann Taylor.
The company was able to sell a portion of Walgreens and work with partners as part of the acquisition. Other companies have shown interest in taking over Walgreens in the past. According to reports at the time, KKR, one of the world's largest private equity companies, offered to buy a pharmacy chain for $70 billion in 2019.
