Walgreens Considers Going Private In History's Largest Leveraged Buyout

Walgreens Boots Alliance may be considering a deal that would take the pharmacy giant private.

Such a maneuver would represent the largest leveraged buyout in history, since Walgreens has a market value of about $55B with debt of $16.8B.

Walgreens

Recently Deerfield, Illinois-based Walgreens held informal talks with private equity firms about the possibility of going private, Bloomberg reports, citing anonymous sources.

Even at that valuation, a leveraged buyout would be something of a bargain compared to earlier periods: Walgreens stock has declined considerably in the last year. In November 2018, the company traded at just over $81 per share. Now it trades for just under $60 per share. Its largest shareholder is CEO Stefano Pessina, who holds about 16% of its outstanding stock.

The firms in the talks reportedly included private equity giant KKR & Co., which is no stranger to Walgreens. In 2007, KKR bought Alliance Boots in partnership with Pessina, who was executive chairman of the UK pharmacy chain. In 2012, KKR stayed on as an investor after Walgreens began its acquisition of Alliance Boots.

By the time Walgreens acquired all of Alliance Boots, in 2015, KKR had roughly quadrupled its cash investment, CNBC reports.

It isn't clear what impact, if any, a privatization would have on Walgreens' expansion plans, which focus on adding significant healthcare features to its existing stores.

The company is now more strongly focused on creating neighborhood health destinations around its pharmacies, co-Chief Operating Officer and President of Walgreens Alex Gourlay said during the company's most recent earnings call in late October.

"We have made significant steps during the year to develop our primary care business," Gourlay said. "Our model is based on physicians and clinical pharmacists, and we'll have primary care locations in four markets across the U.S., working in partnership with partners in primary care, VillageMD, Southwest Medical and Optum Co.

"Our collaboration with LabCorp is well on track," Gourlay said. "We're aiming to open at least 600 LabCorp patient centers across the U.S., providing diagnostic lab testing in the community. We opened 21 centers in the fourth quarter, taking the total to 58."

The company also plans to develop a new wellness partnership in its stores, recently signing an agreement with weight-loss management company Jenny Craig to open centers in about 100 Walgreens locations by early 2020.

Thus far nothing definitive has come from any privatization talks, and the idea might still come to nothing. Thus far, the largest leveraged buyout in history was the 2007 sale of Texas utility TXU Corp. to KKR and TPG, which was worth about $45B including debt, according to data compiled by Bloomberg.

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