Sycamore Partners, a New York-based private equity firm, is reportedly in discussions to acquire Walgreens Boots Alliance Inc., the struggling drugstore chain. While the talks are ongoing and a deal is not guaranteed, the news sent Walgreens’ stock soaring by as much as 28%, its most significant single-day gain since at least 1980.
This potential acquisition comes after a challenging period for Walgreens. The company’s stock had plummeted by two-thirds of its value this year through Monday, making it the worst performer in the S&P 500. In October, Walgreens announced plans to close approximately 1,200 stores over the next three years following a $3 billion loss in the fourth quarter. This substantial loss was attributed to charges related to opioid liabilities and a write-down of an investment in China. Furthermore, Walgreens’ retail division has faced intense competition from online giants like Amazon.com and discount retailers such as Dollar General and Costco.
The market reacted positively to the potential acquisition news, with Walgreens’ stock trading up 20% Tuesday afternoon, giving the company a market value of around $9.2 billion. Neither Walgreens nor Sycamore Partners have offered any official comment on the matter.
This is not the first time Walgreens has been considered a potential acquisition target. In 2019, KKR & Co., in partnership with Walgreens’ current chairman and largest shareholder Stefano Pessina, approached the company about a deal when its market value was significantly higher at $56 billion. Sycamore Partners has a track record of acquiring struggling retailers, including notable acquisitions such as office supplier Staples Inc. and department store chain Belk Inc.
The potential acquisition of Walgreens by Sycamore Partners highlights the ongoing challenges faced by traditional brick-and-mortar retailers in the face of growing online competition and shifting consumer preferences. Should the deal materialize, it would represent a significant shift in the retail landscape and could potentially lead to major restructuring and changes within Walgreens. The successful acquisition and revitalization of such a large and established retail chain would be a significant undertaking for Sycamore Partners, requiring a comprehensive strategy to address the company’s current challenges and position it for future growth.
