The US pharmacy giant Walgreens Boots Alliance has entered discussions regarding a potential sale to private equity firm Sycamore Partners, highlighting the increasing challenges confronting the retail pharmacy sector.
The Illinois-headquartered organisation, which operates more than 12,500 locations across the US, Europe and Latin America, has witnessed its market value plummet from £106 billion in 2015 to approximately £8 billion at Monday’s market close. The news of potential acquisition talks sparked a remarkable 20 per cent surge in the company’s share price on Tuesday.
The dialogue with Sycamore Partners, renowned for targeting distressed retail assets, emerges as Walgreens grapples with significant headwinds. High inflation has eroded consumer spending power, while intensifying competition from digital retailers like Amazon and traditional rivals such as Target has steadily eaten into the company’s market share.
The company’s recent performance reflects these challenges, with October’s announcement revealing plans to close 1,200 stores and reporting a substantial £9 billion net loss for its 2024 fiscal year. The potential sale marks a striking contrast to 2019 when private equity firm KKR proposed a £70 billion acquisition offer.
Tim Wentworth, appointed as chief executive last year following Rosalind Brewer’s departure, faces the complex task of navigating the organisation through this period of transformation. The previous leadership’s attempts to diversify through healthcare acquisitions, including Summit Health-CityMD and CareCentrix, failed to deliver anticipated returns.
Industry analysts suggest that any potential deal would likely require Sycamore, which manages £10 billion in assets, to secure additional partners for the acquisition. The private equity firm’s track record includes successful investments in troubled retailers such as Loft, Hot Topic, and Staples, with the latter acquired for £7 billion in 2017.
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