Walgreens Is Going Private In An Up to $24 Billion Deal

IAfter nearly a century as a publicly traded company, Walgreens Boots Alliance (WBA) is being taken private in a deal valued at up to $23.7 billion. Private equity firm Sycamore Partners is acquiring the struggling pharmacy chain, marking the end of its long public-market history.

This move comes after years of financial decline, with Walgreens’ market capitalization shrinking from $100 billion to around $9.5 billion over the past decade. In this article, we analyze the reasons behind Walgreens’ decline, the details of the buyout, and what it means for the company’s future.

Walgreens’ Struggles and the Road to Privatization

Walgreens’ financial troubles have intensified over the past five years, with its stock losing nearly 80% of its value. The company has struggled with:

• Declining prescription reimbursements, making it difficult to maintain profitability.
• Increased competition from Amazon, CVS, and discount retailers like Dollar General.
• A shrinking store footprint, with 1,200 store closures planned by 2027.
• Strategic missteps, such as costly acquisitions of healthcare clinics like VillageMD instead of aligning with a health insurer like CVS and Aetna.

How the Deal is Structured

• Sycamore Partners will pay $11.45 per share in cash for Walgreens.
• Total deal value (including debt and potential payouts) could reach $23.7 billion.
• Walgreens will continue operating from the Chicago area under Sycamore’s retail portfolio.

According to WBA CEO Tim Wentworth, taking the company private will help accelerate turnaround efforts away from the pressures of public-market expectations.

Why Walgreens Fell Behind CVS

1. Lack of Scale in Pharmacy and Healthcare

Walgreens’ biggest competitor, CVS, benefits from greater scale, allowing it to negotiate better drug prices with insurers and pharmacy benefit managers. Walgreens’ smaller size put it at a disadvantage, leading to lower reimbursement rates and shrinking profits.

2. Strategic Missteps

Unlike CVS, which acquired health insurer Aetna in 2018, Walgreens did not form a strong partnership with a payer. Instead, Walgreens focused on opening primary care clinics (VillageMD), requiring high investments in real estate, technology, and labor. This move failed to deliver expected returns.

3. Store Closures and Real Estate Costs

Walgreens has been forced to shrink its store count, closing over 10% of its locations due to underperformance. By 2027, Walgreens will have shut down 1,200 stores.

• In October 2024, Walgreens announced 1,200 closures (about 14% of its locations).
• In June 2024, it had already planned to close 300 stores due to poor financial performance.
• About 25% of Walgreens stores were considered unprofitable before the closure plans were announced.

What’s Next for Walgreens Under Sycamore?

Potential Changes Under Private Equity Ownership

Retail expert Neil Saunders believes Sycamore Partners will likely:

• Cut costs aggressively to improve profitability.
• Possibly sell off the UK-based Boots chain to raise capital.
• Restructure Walgreens’ healthcare investments, particularly VillageMD.

However, revitalizing Walgreens won’t be easy. The company still faces strong competition, declining reimbursement rates, and a shifting healthcare landscape.

Will Boots Be Sold?

Sycamore may sell Walgreens’ UK-based chain Boots to maximize investment returns. Walgreens acquired Boots in 2014 for $5.3 billion, but its performance has been underwhelming in recent years.

Industry Challenges for Drugstore Chains

Walgreens isn’t the only pharmacy chain facing financial struggles.

1. Falling Prescription Reimbursements

Pharmacies earn less per prescription due to declining reimbursement rates from insurers and pharmacy benefit managers. This trend has shrunk profit margins across the industry.

2. Increasing Competition

• Amazon entered the pharmacy space, offering discounted prescriptions and delivery services.
• CVS has gained market dominance with Aetna’s health insurance integration.
• Dollar General and Target attract price-conscious customers who might otherwise shop at drugstores.

3. Changing Consumer Habits

More consumers are ordering prescriptions online or using mail-order pharmacies, reducing foot traffic in traditional drugstores.

Key Takeaways from Walgreens’ Buyout

• Walgreens is going private in a $23.7 billion deal led by Sycamore Partners.
• The company has struggled financially, losing 80% of its stock value in five years.
• 1,200 store closures are planned by 2027, marking a major shift in Walgreens’ business strategy.
• Sycamore Partners may sell Walgreens’ Boots chain to maximize investment returns.
• The deal is expected to close in Q4 2025.

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