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Walgreens' stock jumps 20% on reports of potential sale talks with private equity firm Sycamore.
Shares of Walgreens gained around 20% on Tuesday after reports emerged that the company is in talks to sell itself to private equity firm Sycamore Partners. The deal, which could be finalized early next year, may involve Sycamore selling off parts of Walgreens' business or partnering with others to restructure the company, according to sources familiar with the matter.
This news comes at a tough time for Walgreens, as the stock has tumbled over 60% this year. The company has had issues with adjusting to post-pandemic conditions, combined with a shake-up in leadership, declining reimbursement rates in its pharmacy business, and a very competitive retail environment. Its expansion into healthcare also hasn't been going so well.
The retail pharmacy giant has failed to meet Wall Street's expectations for earnings for two consecutive quarters, and its pharmacy division is struggling under the weight of lower prescription reimbursement rates and inflationary pressures on the front-end retail business. The company is trying to stabilize under new CEO Tim Wentworth, a healthcare industry veteran who took over in October 2023 and has focused on cost-cutting measures.
Walgreens announced plans in October to close about 1,200 stores over the next three years, including 500 locations by fiscal 2025, as it responds to financial pressures. A quarter of its roughly 8,700 U.S. stores are considered unprofitable. Walgreens also scaled back its healthcare ambitions by reducing its stake in VillageMD, a primary care provider.
Walgreens had earlier been one of the prime targets of private equity interest. KKR, a private equity firm, had made a buyout offer for the company to the tune of $70 billion in 2019. The Sycamore Partners' new round of talks may usher in a new chapter in the company's efforts to regain momentum against the backdrop of continuing setbacks in the retail pharmacy and healthcare industries.
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