Troubled pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA) has been a spectacular disappointment since completing its merging in 2014. Shares rose to a high of $97.14 following the union but had since fallen % to a low of $8.11 on November 21. 2024.
The retail/wholesale sector giant’s attempt to grow into an integrated healthcare provider as the world’s largest pharmacy chain in the medical sector fell short as it overleveraged itself with Rite Aid and VillageMD acquisitions. The company is still an asset giant, which may be worth more in parts than the whole. Despite the $11.45 per share announcement to be acquired by Sycamore Partners in a $23.7 billion deal, shareholders must still approve and can turn it down.
Along Came Sycamore Partners at $11.45 Per Share
On March 6, 2025, private equity firm Sycamore Partners announced its agreement to purchase Walgreens Boots Alliance for $11.45 per share in cash or $23.7 billion. Walgreens shares were already trading at $10.75 the previous evening, resulting in a very tiny premium. The offer also contains a $3.00 Divested Asset Proceed Right. Sycamore intends to sell off some of its assets, including Village Medical, and investors get additional proceeds of up to $3 per share.
A 35-Day Go Shop Period is Provided, But 26% Dividend Awaits
Under the agreement with Sycamore, Walgreens is provided with a 35-day "go shop" period, which enables the company to actively pursue or accept additional offers from other parties. Centerview Partners is its financial advisor.
To “sweeten the pot," Sycamore is offering the Divested Asset Proceed Right of $3.00 per share immediately after the deal closes. Shareholders would not have to wait until they sell off the Village Medical (TASE:BLWV), CityMD and Summit Health subsidiaries. This results in a 26% one-time dividend for taking the deal. This may certainly tempt investors into buying shares to receive a lucrative return on investment (ROI). The deal is expected to close in the fourth quarter of 2025.
Was This Wall Street’s Worst Kept Secret?
The fact that Walgreens shares were trading near the $11.00 range ahead of the buyout announcement indicates the cat may have already gotten out of the bag as the rumors swelled. Bloomberg first reported the rumors in December 2024, and CNBC’s David Faber reported the potential for a deal in February 2025, which helped drive shares higher after bouncing off the $9.32 price level.
Since the stock is now trading within pennies of the $11.45 per share buyout, there is a lot of confidence that the deal will either follow through or another buyer may step up to the table. The 26% dividend is a tough offer to walk away from unless you are a shareholder (aka bagholder) that shares above the $14.45 price level, of which there are plenty. There is also no termination fee, so if existing shareholders terminate the deal, Walgreens gets nothing.
A Turnaround May Have Been Gaining Traction Like Rival CVS Health
On January 10, 2025, Walgreens reported fiscal Q1 2025 earnings per share (EPS) of 51 cents, signaling that the turnaround was gaining traction. Revenues rose 7.6% year-over-year (YoY) to $39.5 billion, beating the $37.4 billion consensus analyst estimates. Its U.S. Retail Pharmacy segment saw sales rise 6.6% YoY, and comparable sales rose 8.5% YoY. International sales rose 10.2% YoY to $6.4 billion.
Rival CVS Health (NYSE:CVS) revealed its turnaround is also gaining traction in the February 12, 2025, release of its Q4 2024 results, beating consensus EPS estimates by 28 cents as revenues grew 4.2% YoY to $97.71 billion, beating $97.09 billion consensus estimates.
Its U.S. Healthcare segment saw growth in all its businesses, including Village Medical sales, rising 9%, CareCentrix sales, rising 16%, and Shield, rising 30% YoY. The company reaffirmed its fiscal full-year 2025 guidance for EPS of $1.40 to $1.80 versus $1.52 consensus estimates. Growth in its U.S. Healthcare and International sales should more than offset the decline in its U.S. Retail Pharmacy business.
The CEO Is Sold on the Acquisition
It’s worth noting that Walgreen’s CEO Tim Wentworth is in favor of the deal, stating, "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.”