The Walgreens logo featured for a story about Walgreens private equity deal
The Walgreens logo featured for a story about Walgreens private equity deal
… Is Walgreens going private or strategically putting itself up for sale? …


Could Walgreens be strategically signaling it is up for sale to the highest bidder by presumably going through the motions of taking itself private?

John G. Baresky

Walgreens partnerships key considerations:

  • Boots Alliance ( WBA ) is reportedly consulting KKR, a leading global private equity firm, about its options to go private
  • With an estimated market capitalization of $50 to $60 billion it would be one of the largest public to private deals in history
  • The current debt load of Walgreens is about $15 billion and is a pivotal cost element undertaking such a deal
  • If KKR were to orchestrate the public to private deal with Walgreens, it would likely enlist additional financial partners such as other private equity firms and investment bankers

Walgreens would be a blockbuster private equity play

Reportedly Walgreens ( NASDAQ: WBA ) is exploring options to take itself private. Officially known as Walgreens Boots Alliance, the global pharmacy and consumer healthcare leader going private would create one of the largest leveraged buyouts in history.

Walgreens Boots Alliance is a consumer retail, pharmacy, healthcare services, supply chain leader

Taking Walgreens private may involve an estimated range of $50 billion to $60 billion to execute the transaction. Most of the company’s global scope and scale are overlooked by consumers and even those in the healthcare sector:

  • Daily, Walgreens interacts with over 8 million customers in stores and online
  • They operate more than 9,000 stores in the United States and more than 13,000 units worldwide in 11 countries.
  • Walgreens owns 26% of AmerisourceBergen; one of the world’s largest drug wholesalers
  • They are a minority shareowner of Option Care Health, the largest home infusion and alternate site care provider in the nation servicing patients in all 50 states and administers over 2 million doses of various IV therapies per month; Option Care Health ( NASDAQ: BIOS ) was formed through the merger of Option Care and BioScrip in 2019
  • The company has a pilot venture underway with grocery retail giant Kroger involving Walgreens health and beauty brands being sold in Kroger stores and Walgreens selling select Kroger grocery goods in their stores plus supporting Kroger online ordering consumer pickup services at participating stores
  • Microsoft and Walgreens are collaborating on a suite of chronic disease management and patient engagement applications plus a portfolio of connected Internet of Things (IoT) devices for nonacute chronic care management, delivered by Microsoft’s cloud, AI and IoT technologies
  • About 78% of the population in the United States lives within 5 miles of a Walgreens store or a Walgreens-owned Rite Aid or Duane Reed store.
  • Walgreens has an active partnership with Blue Cross Blue Shield affiliated prescription benefit manager Prime Therapeutics known as AllianceRx Walgreens Prime)

Significant cost reduction measures at Walgreens are boosting profits and providing funds for reinvestment in the company

The company recently announced a corporate cost-cutting initiative with a goal of $1.8 billion in expense reduction by 2022 -an amount that was increased from an original objective of $1.5 billion.

Investment required for a Walgreens Boots Alliance private equity deal will likely involve several financial players

The estimated $50 billion to $60 billion required to take Walgreens private is quite a large sum. It is likely more than one investment firm would be needed not just for the funding but also to spread the risk. A single private equity firm or investment bank would likely not want to sink $50 billion to $60 billion into a single asset as risk is always a factor no matter how stable an asset is and as new lucrative opportunities present themselves they would want funding available for them.

Does the prospect of Walgreens going private trigger someone else to acquire them?

Based on its many attributes, Walgreens is an extraordinarily valuable company and potentially a target for another type of ownership change. It generates over $136 billion in annual sales. Conceivably another company could make a run at acquiring Walgreens before they went private. Key considerations for another retailer to buy Walgreens would include the financing of the deal itself, integrating the new organization and assuring profitability while servicing their existing debt and the new debt of the deal — which would have the added burden of Walgreens’ existing $17 billion debt load.

The opportunity to acquire a company like Walgreens does not come around often; it is a solid organization with established brand and earnings credentials

Despite Walgreens’ debt load and the scale of a deal, their consumer retail and pharmacy business savvy plus technology and logistics leadership are undeniably platinum assets not to mention excellent store locations and large share ownership of AmerisourceBergen plus its partnership with Prime Therapeutics.

On the surface, there are some big retail and online players to consider when thinking about who could be capable of acquiring Walgreens

Mergers and acquisitions are rampant across the healthcare sector in numerous product, service and patient care categories. Walgreens makes for an interesting target as it is top tier in terms of quality, uniqueness and scale; many corporations would love to have them as an operating unit. Once the fiscal and organizational details are looked at more closely, only a small number of companies are viable contenders to orchestrate an acquisition of Walgreens:

Moving forward, Walgreens is a formidable company on its own or as an operating unit of another organization

Based on this lineup, Amazon, Kroger and Walmart are potential suitors; Costco a runner up based on an assumable reluctance to tamper with its unique and successful business model. There is a lot for Walgreens, its competitors, investors and potential suitors to consider based on the opportunity as well as risk.

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Authentic, fact-based healthcare content marketing writing for medical, business, academic, patient and consumer audiences

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