In this article, shares of Walgreens surged approximately 20% on Tuesday following a report that the company is in discussions to sell itself to private equity firm Sycamore Partners.
According to sources familiar with the matter as reported by The Wall Street Journal, Walgreens and Sycamore have been engaged in talks for a potential deal that may be finalized early next year. Sycamore Partners, based in New York, is likely to divest parts of Walgreens’ business or collaborate with partners, as per the Journal.
A spokesperson for Walgreens chose not to provide a comment on the rumored discussions.
This development comes at a challenging time for the retail pharmacy giant, with its stock having dropped over 60% for the year prior to the surge on Tuesday.
Walgreens has faced difficulties due to the aftermath of the Covid pandemic, changes in leadership, challenges in pharmacy reimbursement, and struggles in its healthcare expansion efforts. The company has fallen short of Wall Street’s earnings projections for two consecutive quarters. Particularly, Walgreens’ pharmacy segment has been struggling due to declining reimbursement rates for prescription drugs and various pressures on its retail operations, including inflation and heightened competition.
To address these issues, Walgreens appointed a new CEO, Tim Wentworth, a seasoned professional in the healthcare industry. Since assuming the position in October 2023, Wentworth has initiated cost-cutting measures at Walgreens.
In October, Walgreens announced plans to shut down approximately 1,200 of its drugstores over the next three years, including 500 in fiscal 2025 alone. With about 8,700 locations in the U.S., a quarter of which are reportedly unprofitable, the company has also reduced its involvement in primary care by reducing its ownership stake in primary care provider VillageMD.
Walgreens has previously been considered a potential target for private equity firms. In 2019, reports from the Financial Times and Bloomberg indicated that private equity firm KKR had made an acquisition offer of around $70 billion to the company.
