The public scrutiny and criticism of Walgreen will soon be diminished, but not forgotten. That’s because the Deerfield, IL-based drug and healthcare firm earlier this month announced it has entered into a definitive agreement to be acquired by an entity affiliated with private equity firm Sycamore Partners. However, a new parent firm, even a well-capitalized one, hardly assures that the retailer’s long-term financial decline will lessen anytime soon.
The deal’s equity value is slightly under $10 billion. The two parties have been negotiating a potential alliance since December 2024.
Walgreens Boots Alliance’s (WBA) shareholders will receive $11.45 per share in cash at closing of the Sycamore transaction and one non-transferable right (a “divested asset proceed right” or “DAP right”) to receive up to $3.00 in cash per WBA share (together with the cash consideration, the “total consideration”) from the future monetization of WBA’s debt and equity interests in VillageMD, which includes the Village Medical, Summit Health and CityMD businesses (such businesses, “divested assets”).
The companies said that the cash consideration represents a premium of 29 percent, and the total consideration represents a premium of up to 63 percent to the WBA closing share price of $8.85 on December 9, 2024, the day prior to the first media reports regarding a potential transaction. A day before the deal was announced (March 5), WBA was trading at $10.75 per share.
WBA and Sycamore noted that by leveraging the retailer’s healthcare expertise and Sycamore’s established leadership in retail and consumer services, WBA will be better positioned to become the first choice for pharmacy, retail and health services. The company will continue to operate under Walgreens, Boots and its portfolio of consumer brands. WBA will maintain its headquarters in the Chicago area.
Tim Wentworth, who joined WBA as CEO in October 2023, said, “Throughout our history, Walgreens Boots Alliance has played a critical role in the retail healthcare ecosystem. We are focused on making healthcare delivery more effective, convenient and affordable as we navigate the challenges of a rapidly evolving pharmacy industry and an increasingly complex and competitive retail landscape. While we are making progress against our ambitious turnaround strategy, meaningful value creation will take time, focus and change that is better managed as a private company. Sycamore will provide us with the expertise and experience of a partner with a strong track record of successful retail turnarounds. The WBA board considered all these factors in evaluating this transaction, and we believe this agreement provides shareholders premium cash value, with the ability to benefit from additional value creation going forward from monetization of the VillageMD businesses.”
Wentworth added: “Our trusted brands and deep commitment to our customers, patients, communities and team members have and will continue to anchor our business as we realize our goal of being the first choice for pharmacy, retail and health services. I am grateful to the more than 311,000 team members globally who are fiercely committed to WBA, our customers and patients.”
“For nearly 125 years, Walgreens, and for 175 years, ‘Boots,’ along with their portfolio of trusted brands, have been integral to the lives of patients and customers. Sycamore has deep respect for WBA’s talented and dedicated team members, and we are committed to stewarding the company’s iconic brands,” said Stefan Kaluzny, managing director of Sycamore Partners. “This transaction reflects our confidence in WBA’s pharmacy-led model and essential role in driving better outcomes for patients, customers and communities.”
The transaction is expected to close in the fourth quarter of calendar year 2025. Upon completion of the transaction, WBA’s common stock will no longer be listed on the Nasdaq stock market, and WBA will become a private company.
The transaction agreement provides for a so-called “go-shop” period, during which WBA, with the assistance of investment firm Centerview Partners, its financial advisor, will actively solicit, and depending on interest, potentially receive, evaluate and enter into negotiations with parties that offer alternative proposals. The initial “go-shop” period is 35 days. Sycamore said that there can be no assurance that this process will result in a superior proposal.
Sycamore and WBA have entered into voting and reinvestment agreements with WBA’s executive chairman, Stefano Pessina (who served as CEO of WBA from 2015-2021), and his holding company, who in the aggregate own approximately 17 percent of WBA’s shares of outstanding common stock. Under these agreements, Pessina and his holding company will vote all of their shares of WBA common stock in favor of the transaction (consistent with obligations under his existing shareholder’s agreement), subject to certain terms and conditions contained therein, and will reinvest all of their cash consideration received in the transaction, in addition to an incremental cash investment, into the acquiring company. Pessina and his holding company will also maintain a significant equity investment in the businesses. Pessina and his holding company will receive one DAP right per share of WBA common stock owned by them and, accordingly, will hold approximately 17 percent of the DAP rights following the closing of the Sycamore transaction.
As previously announced, WBA is currently evaluating a variety of options with respect to its significant debt and equity interests in the divested assets. Following the closing of the Sycamore transaction, a committee consisting of a representative of the pre-closing WBA board of directors, a representative of Pessina and a representative of Sycamore (the “divested assets committee”) will determine the nature and timing of the process to maximize value of WBA’s debt and equity interests in the divested assets. The divested assets committee intends to consider all paths available to maximize the value of these businesses, including actions to significantly enhance operational performance and strengthen the balance sheet of the businesses, ahead of any future monetization transaction or transactions.
WBA shareholders will receive, at closing of the Sycamore transaction, one non-transferable DAP Right per WBA share.
As the sole lender to the divested assets businesses, WBA expects to receive 100 percent of the initial net proceeds of any sale or sales of the Divested Assets up to the amount of debt owed to WBA by VillageMD, which as of February 28, 2025, is $3.4 billion, accruing payment-in-kind interest at 19 percent per year.
Pursuant to the terms and conditions of the DAP rights, 70 percent of any such net proceeds received by WBA from the sale or sales of the divested assets would be payable to DAP right holders. The maximum amount payable to DAP right holders is $3.00 per DAP right or approximately $2.7 billion in the aggregate.
The announcement noted that although the divested assets committee will strive to maximize the value of the divested assets, and therefore, the DAP rights, there can be no assurances that a sale of the divested assets will occur, and no assurances as to the timing, terms or amount of proceeds from any potential sale of the divested assets.
WBA will release its fiscal year 2025 second quarter financial results on April 8, 2025. In Q1 of fiscal 2025 ended November 30, 2025, WBA’s net operating loss was $265 million and it suspended its quarterly dividend, depriving shareholders of its quarterly bonus for the first time since the mid-1930’s. The drug merchant/ healthcare organization is in the process of closing about 1,200 of its 8,500 stores nationally.
