Walgreens Boots Alliance to Go Private – What’s Next for the Pharmacy Giant?

• Private equity firm Sycamore Partners rescued and revived Walgreens Boots Alliance as part of its restructuring strategy and possible reconfiguration, including possible UK brand Boots divestment.
• The company had recently declined in fortunes through closed stores and plummeting stock value, as recently evidenced by WBA going private with a deal of $23.7 billion.

Almost a century after Walgreens Boots Alliance (WBA) was founded on the stock exchange, it is heading for being private, thanks to a deal of 23.7 billion dollars. This has come after undergoing financial hardships for several years, closing down stores, and being hit hard by competition. Walgreens Boots Alliance now aims to think differently for its future. Cash was offered by the private equity firm Sycamore Partners at $11.45 per share, and the whole valuation of the deal—including debt—could reach billions more.

It’s the end of the line for Walgreens. It went public in 1927, just before opening its 100th store around Chicago. Now, after decades of being a Wall Street household name, it goes out of sight with hopes of starting afresh.

Why Is Walgreens Going Private?

Walgreens has certainly not had an easy time. The stock, worth nearly 80% less than five years ago, has lost almost all its value. A decade ago, the company carried a weight of around a hundred billion dollars but has come down badly to only about 9.5 billion dollars today. The business has declined from lessening profits to stiff competition and increasing costs.

Added to this is the increasing number of stores closing down by Walgreens; last year, it was disclosed that about 1200 stores were to be put out of operation, meaning one of every seven Walgreens stores will not be available by 2027. These shutdowns are part of a larger activity to reduce costs and to concentrate on locations bringing profits.

Can Sycamore Partners Rescue Walgreens?

Sycamore Partners, the private equity firm well known for turning around such institutions, now will have to consolidate all its might toward the rehabilitation task of Walgreens. According to CEO Tim Wentworth, boutique cosmetics are believed to be in a much better position to realise such goals away from the public, where most retail companies tend to go.

Wentworth said, “We are making some progress, but real change takes time.” “Going private will help us focus on the long term without the distractions of quarterly earnings reports.”

What Went Wrong with Walgreens?

Through its ups and downs, just like others such as Rite Aid and CVS, Walgreens suffers an enormous share of troubles.

Competing with CVS: CVS provides an extended arm under which it can negotiate with the insurers to get lower prices, as the former is much bigger than the latter, and thus it can negotiate on even better terms. Besides, what adds to CVS’s advancement is the later acquisition of Aetna in 2018.

Investing in Wrong Areas: Big bucks went to VillageMD toward spending on healthcare: clinics. However, clinics are expensive to run, so Walgreens transferred large amounts of money into real estate, new technology, and staffing without the expected return.

More Competition: Other pharmacies are not the only ones giving problems. Somehow or another, even without competitor pharmacies, the prescription business has swung toward Amazon, and front-end sales are shared via discount stores, such as Dollar General.

What Will Happen to Boots?

One of the major questions right now is what will happen to Boots, the British pharmacy chain. Walgreens acquired complete control of Boots in 2014 for $5.3 billion, although analysts believe Sycamore could sell off the asset to maximise its returns.

Neil Saunders, an industry specialist, says the deal is a “long-term investment” and not a get-rich-quick scheme, but he goes on to say that major cuts are highly likely to stabilise the company.

Walgreens: What Lies Ahead?

The Sycamore deal seems to have a day-of-the-week rendezvous with New Year 2025, although much will depend on Sycamore’s behaviour: whether the restructuring will be successfully abrogated by Sycamore or whether Walgreens will be forced to row against the torrid currents of the business alone?

What is visible is that this is not a story solely about cost-cutting. Walgreens must rethink its identity if it intends to make inroads in an ever-quickening timeframe of change in health, retail, and technology. Time shall tell whether privatisation will turn out to be a good move for Walgreens, but it might just be banking on a much-needed opportunity to redefine itself.