Sycamore Partners has struck a $10 billion deal to take Walgreens private, potentially rescuing the troubled pharmacy giant that has lost over 90% of its market value in the past decade.
Key Insights
- Sycamore Partners will pay $11.45 per share for Walgreens, an 8% premium over recent market price, with potential for an additional $3 per share from future VillageMD monetization.
- Walgreens has struggled with declining drug price margins, competition from Amazon and Walmart, and has seen its market value plummet from nearly $100 billion to just over $9 billion.
- The pharmacy chain plans to close at least 1,200 stores over the next three years as part of its restructuring efforts under private ownership.
- Sycamore Partners, known for retail investments in companies like Staples and Nine West, has a history of asset sales and aggressive cost-cutting measures.
Private Equity Rescue for a Struggling American Pharmacy Giant
Walgreens Boots Alliance has agreed to be acquired by private equity firm Sycamore Partners in a $10 billion deal that will take the struggling pharmacy chain private. The transaction, announced this week, represents a significant turning point for one of America’s most recognizable retail pharmacy brands.
Under the terms of the agreement, Sycamore will pay $11.45 per share, representing an 8% premium over Walgreens’ closing price of $10.60 before the announcement. Shareholders may also receive up to an additional $3 in cash from the future monetization of Walgreens’ interests in VillageMD.
The deal comes as Walgreens faces mounting challenges in a rapidly changing healthcare and retail landscape. The company’s market value has cratered from nearly $100 billion a decade ago to just over $9 billion today. This dramatic decline reflects the pharmacy chain’s inability to adapt to falling drug price margins and intense competition from tech giants like Amazon and big-box retailers like Walmart, which have aggressively expanded their pharmacy services with competitive pricing and home delivery options.
Sycamore Partners is nearing an acquisition of Walgreens Boots Alliance Inc. in a deal that could end the drugstore operator's run as a public company. No major premium… $WBA
The Wall Street Journal reported earlier that Sycamore was closing in on a deal to acquire Walgreens…
— Special Situations 🌐 Research Newsletter (Jay) (@SpecialSitsNews) March 4, 2025
Strategic Missteps and Mounting Debt
While its primary competitor CVS successfully diversified by acquiring health insurer Aetna, Walgreens chose a different path that has proven less successful. Instead of expanding into insurance or prescription benefit management, Walgreens invested heavily in acquiring other pharmacy chains, including a partial acquisition of Rite Aid stores. This strategy resulted in an oversized retail footprint at a time when foot traffic was declining, ultimately leading to the need for widespread store closures.
“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
Compounding these challenges is Walgreens’ mounting debt burden. The company’s debt and lease obligations have swelled to nearly $30 billion, constraining its financial flexibility and limiting options for recovery as a public company. The strain is evident in Walgreens’ workforce and store count reductions. The company currently employs 312,000 people across 12,000 stores in eight countries, down substantially from 450,000 employees in 21,000 stores across 25 countries just four years ago.
Sycamore’s Track Record and Future Plans
Sycamore Partners, which specializes in retail and consumer investments, has built a reputation for acquiring distressed retailers at bargain prices. The private equity firm’s portfolio includes well-known brands such as Staples, Talbots, and Nine West. Industry analysts note that Sycamore typically employs a strategy of selling valuable assets and aggressively reducing costs to extract value from its acquisitions. This approach could signal major changes ahead for Walgreens’ operations and structure.
As part of its restructuring efforts, Walgreens has already announced plans to close at least 1,200 underperforming stores over the next three years and implement a $1 billion cost-cutting program. The privatization deal offers potential exit opportunities for Sycamore through Walgreens’ investments in VillageMD and its international operations such as Alliance Boots. These assets could be sold separately to generate returns while allowing the core U.S. pharmacy business to restructure away from public market pressures.
A New Chapter for American Pharmacy Retail
The Walgreens acquisition represents a significant moment in American retail pharmacy history. President Trump’s economic policies that encourage domestic investment may provide a favorable environment for Sycamore to implement its turnaround strategy. The transaction is expected to close in the first half of 2026, subject to regulatory approvals and other closing conditions. For many Americans who rely on their neighborhood Walgreens for prescriptions and everyday essentials, the most immediate impact may be seeing their local store on the list of planned closures as the company streamlines its operations.
