Walgreens (WBA) finalized an up to $27.3 billion deal to take itself private after four months of negotiations with Sycamore Partners, the companies announced Thursday. 

Sycamore is a New York-based private equity firm specializing in retail business investments. It has invested in brands like Staples, Ann Taylor Loft, Aeropostale and Express. 

Walgreens entered into a definitive agreement to be acquired by an entity affiliated with Sycamore, the company said in a statement late Thursday. Shareholders will receive a total of $11.45 per share in cash, or $10 billion, at closing of the Sycamore transaction, the statement 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," CEO Tim Wentworth said in the statement.

He added: "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."

The deal includes all elements of Walgreens, including VillageMD, which the company is winding down its stake in, and a specialty pharmacy unit. 

It also includes the Alliance Boots business, which was acquired in 2014, and is one of the company's strongest assets.

Walgreens pharmacy benefits manager (PBM), Shields, is also part of the deal. It too has been deemed a strong asset by investors, but it never captured significant market share against the Big 3: UnitedHealth's OptumRx (UNH), CVS's Caremark and Cigna's Express Scripts (CI).

One the deal was announced, Walgreens stock soared more than 5% after market close — ironically, as it prepares to exit the public markets.

When the deal was first reported in December, it caused the stock to climb as well, as investors looked for a shakeup. The company has been downgraded by a few firms, and has a majority hold ratings — 11 total — as of this week. 

Walgreens, once valued at more than $100 billion in 2015, has dropped in the past couple years to under $10 billion, as it struggled to prove its value in the growing e-commerce environment. For fiscal year 2024, Walgreens reported revenue of $147 billion, up 6% year over year. But the company also reported a loss per share of $10.

The take-private deal marks an end to Walgreen's presence in the stock market, just shy of 100 years. It first went public in 1927, 26 years after the first store opened in 1901. The company suspended its quarterly dividend to stockholders for the first time in its history this January, as it continued negotiations with Sycamore.

"This change in capital allocation is aimed at strengthening WBA’s balance sheet by reducing debt over time and improving free cash flow, as the company works toward achieving a retail pharmacy-led turnaround underpinned by a sustainable economic model. The company’s cash needs over the next several years, including with respect to litigation and debt refinancing, were important considerations as part of the decision to suspend the dividend," the company said in a statement in January.

HERE FOR RELEVANT UNTOUCHED NUGGETS/ DETAILS OF DEAL

Just another blow to retail health

The deal reflects an ongoing decline in publicly traded retail pharmacy giants, as Walgreens follows the path of Rite Aid, which went private last year after climbing out of bankruptcy. 

With more online competition and reimbursement pressures from insurers and pharmacy benefits managers, only vertically integrated health care companies, like CVS (CVS), and grocery store pharmacies, like Walmart (WMT) and Kroger (KR) — entities that rely majorly on other sources of income — can survive.

The decline for standalone retail pharmacy began about 10 years ago, according to Jefferies analyst Brian Tanquilut.

"If you think about what that came from, its Amazon (AMZN) eating into the front end of store market share, the Dollar Stores have grown quite significantly in terms of footprint, and they've present a healthy level of competition for the retail pharmacies. And then the grocer store chains have also....rolled out the pharmacies they operate," Tanquilut said.

Retailers have also faced increased competition in recent years from direct-to-consumer online platforms like Hims & Hers (HIMS) or Amazon Pharmacy, which have made it easier to access some prescriptions. Its why, despite Walgreens' efforts to turnaround the company under CEO Tim Wentworth's leadership, by shuttering stores in low-performing markets, it was unable to compete and avoid the take-private deal.

Mizuho Securities healthcare expert Jared Holz noted that it wasn't so much an end of an era for retail pharmacies as it is just another retailer having to come to terms with the online environment. 

But beyond that, the company had not pivoted in time to match the vertical integration at scale that CVS achieved — with the acquisition of health insurer Aetna, as well as health services through even though the latter also has questions swirling about the viability of its healthcare endeavors.

"They've probably tried to emulate CVS as much as they can. And they are subscale in...pretty much all of the non-retail elements of the business," Holz said.

Other analysts have similarly noted that many of the acquisitions or investments from Walgreens lagged CVS, or were in areas that didn't pan out to be as strong as expected.

"There are little synergies between Walgreens' three major business lines (the U.S. Retail Pharmacy, International, and U.S. Healthcare (VillageMD/Summit). Whether public or private, the focus for Walgreens is to streamline operations and to pay down debt as the company continues to struggle to generate meaningful cash flow," wrote BofA Securities analyst Allen Lutz in a recent note to clients, prior to the deal.

He similarly focused on how Walgreens failed to truly compete with CVS.

"Overall, the retail pharmacy business is likely to remain under structural pressure, given Walgreens' position in the pharmacy supply chain and lack of a direct relationship with a PBM or health plan. We maintain our Underperform rating," Lutz wrote.

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on social media platforms X, LinkedIn, and Bluesky @AnjKhem.

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