Sycamore Partners has reached a deal to acquire Walgreens Boots Alliance for $10 billion, taking the struggling pharmacy giant private as it grapples with plummeting valuation and increasing competition.
Quick Takes
- Sycamore Partners will pay $11.45 per share for Walgreens, an 8% premium over the closing price of $10.60
- Walgreens’ market value has plummeted from nearly $100 billion a decade ago to just over $9 billion today
- Shareholders may receive an additional $3 per share from future monetization of VillageMD interests
- Walgreens plans to close at least 1,200 stores over the next three years as part of restructuring
- As a private company, Walgreens will have more flexibility to implement major changes and cost-cutting measures
The Fall of a Retail Pharmacy Giant
Walgreens Boots Alliance has agreed to be taken private by Sycamore Partners in a $10 billion deal that marks a dramatic turning point for the once-dominant pharmacy chain. The acquisition price of $11.45 per share represents an 8% premium over Walgreens’ closing price of $10.60, highlighting how far the company’s fortunes have fallen in recent years. This transaction reflects the challenging landscape for traditional pharmacy retailers facing intense competition from Amazon, Walmart, and other major players who have aggressively entered the prescription drug market with lower prices and more convenient delivery options.
The stark reality of Walgreens’ decline is evident in its market valuation, which has shrunk from nearly $100 billion a decade ago to just over $9 billion today. During this period, the company has accumulated nearly $30 billion in debt and lease obligations while failing to diversify its business model to compete effectively in the changing healthcare marketplace. Unlike its main competitor CVS, which strategically acquired health insurer Aetna to expand beyond retail pharmacy, Walgreens doubled down on brick-and-mortar locations by purchasing Rite Aid stores, resulting in an oversized and increasingly unprofitable footprint.
Breaking News: A private equity firm is buying Walgreens in a $10 billion deal that will take the struggling pharmacy chain out of the public market. https://t.co/sFYyLLFEnX
— The New York Times (@nytimes) March 7, 2025
Sycamore’s Strategic Acquisition Approach
Sycamore Partners, a private equity firm specializing in retail and consumer investments, has built a reputation for acquiring struggling retail brands and implementing aggressive restructuring. The firm’s portfolio includes well-known but distressed retailers such as Staples, Talbots, and Nine West. With Walgreens, Sycamore sees an opportunity to apply its turnaround playbook by cutting costs, selling non-core assets, and streamlining operations. The private equity firm likely views Walgreens’ valuable real estate holdings and its international businesses as potential assets that could be monetized to create additional value.
“As a private company, WBA would have more flexibility to make major changes to the business, in our view, and aggressively cut costs to try to tackle recent challenges with pharmacy operating margins and declining retail product sales from increased online competition.” – CFRA Research analyst Paige Meyer
Walgreens shareholders stand to benefit beyond the initial acquisition price. The deal includes the potential for an additional $3 per share from future monetization of the company’s interests in VillageMD, a primary care provider that Walgreens invested in heavily. This contingent value right represents an acknowledgment of Walgreens’ diversification attempts and provides shareholders with some upside potential from one of the company’s more promising strategic investments. The transaction is expected to close in the second half of 2025, subject to shareholder approval and regulatory clearances.
A Dramatic Downsizing Already Underway
Even before this acquisition announcement, Walgreens had already begun implementing significant cost-cutting measures and store closures. The company currently employs 312,000 people across 12,000 stores in eight countries, a substantial reduction from 450,000 employees in 21,000 stores across 25 countries just four years ago. Under the new ownership, this contraction will accelerate, with plans to shutter at least 1,200 additional stores over the next three years and implement a $1 billion cost-cutting program aimed at addressing underperforming locations and streamlining operations.
The challenges facing Walgreens reflect broader issues in the retail pharmacy sector, where falling drug price margins have squeezed profitability while online competitors have captured increasing market share. Former CEO Stefano Pessina’s strategic decisions, particularly the acquisition of additional physical stores rather than diversifying into healthcare services or insurance, are now widely seen as missteps that left the company vulnerable. Going private may provide Walgreens the breathing room needed to make painful but necessary changes outside the scrutiny of quarterly earnings reports and shareholder pressure.
