The Deerfield-based parent of Walgreens is considering taking the company private, potentially the largest leveraged buyout in history, news services reported Tuesday.
Counting the company’s debt, the buyout of the blue-chip stock could be worth more than $70 billion. Walgreens Boots Alliance is a member of the Dow Jones Industrial Average; its market value stands at more than $52 billion. Shares closed Tuesday at $61.21, up 2.6% for the day on the news of the possible buyout.
But it remains unclear what advantage the drugstore company would get from going private. With more than 18,750 locations in 11 countries, Walgreens has an unmatched retail footprint but faces an array of pressures to hold the line on prescription costs. In its latest earnings report Oct. 28, the company said its expects little growth next year.
“It remains unclear what changes they could make as a private company. It’s not at all obvious,” said Steven Kaplan, finance professor at the University of Chicago and an expert in private equity. He said that with a deal valuation of about 11 times Walgreens’ cash flow, the buyout would be hard to finance.
Citing sources, Bloomberg and Reuters reported Walgreens’ interest in a buyout. Reuters said Walgreens has hired investment bank Evercore Partners to investigate a deal.
Walgreens and Evercore declined to comment.
Stefano Pessina, Walgreens’ executive vice chairman and CEO, is the company’s leading shareholder, with about a 16% stake. He could use those shares as equity for the deal, reducing what has to be raised from other sources.
It also could raise cash by divesting a 27% stake it has in drug wholesaler AmerisourceBergen, as well as its portfolio of health and beauty products. But those are steps it could take anyway to reduce debt of $16.8 billion.
The company operates Walgreens and Duane Reade stores in the U.S. and Boots stores in Europe and Asia.
It has found itself with too many locations. Walgreens in recent years has closed some stores, including some of the 1,900 Rite Aid locations in bought in 2017 after antitrust regulators rejected its bid to take over the entire company. This year, it has announced closing of 200 stores in the United Kingdom and 200 in the U.S.
It has tried to stoke growth with partnerships, such as one that allows customers to order online groceries from Kroger and pick them up at Walgreens. The drug stores also are making space for Jenny Craig weight-loss clinics, sometimes by closing health care facilities for treating minor ailments.
In contrast, competitor CVS Health last year bought private insurer Aetna for $70 billion.
Walgreens plans to remain based in Deerfield, but it is moving about 1,800 workers to the Old Post Office downtown.