A Walgreens Boots Alliance acquisition would be a monster

Walgreens Boots Alliance is looking at a huge windfall, especially if private equity is involved.

The retailer, which runs the nation's second largest pharmacy chain for prescription drug revenues, could see the largest utilized acquisition in history; valued at an estimated $ 85 billion.

Private equity firm KKR earlier this week approached the retailer about a go-private deal, Bloomberg reported Monday.

Both Walgreens and KKR have declined to comment.

Walgreens shares spiked the news, before taking up $ 62.25 a share on Wednesday, giving it a market value of around $ 55.6 billion.

However, JPMorgan analyst Lisa Gill believes that a go-private deal can value Walgreens at a much larger premium.

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In a note sent to clients on Tuesday, Gill said that an agreement could "involve a maximum transaction value of ~ $ 85 billion , which would mean an equity value of $ 74.97 per share. " She based the valuation on a debt ratio of 6.5 times, and other financial calculations. Such a valuation would be a premium of about 21 percent to Wednesday's stock price.

At $ 75 per share, Walgreens would still be 15 percent below the 52-week high of $ 86.31 set December 4. Walgreens shares have been under pressure for the past year since the company suffered from falling margins and slowed sales as it competes against Amazon, CVS-Aetna and other competitors such as online pharmacies. Kroger and Walmart are also tough competitors when it comes to the grocery business.

In the company's Q2 / April 2 earnings report, CEO Stefano Pessina still blamed "market challenges and macro trends," resulting in the "most difficult quarter" since the formation of the Walgreens Boots Alliance.

US-based Walgreens merged with Alliance Boots in December 2014, in an agreement that combined the country's largest drug chain with Europe's largest pharmaceutical wholesaler.

A Walgreens Boots Alliance goes -Private agreement was to mark the second time KKR has done business with the pharmacy chain.In 2007, KKR reached a deal of 22 $ 196 billion for Alliance Boots, creating the largest utilized acquisition in European history.

The same year, KKR teamed up with Texas Pacific Group to make a $ 45 billion deal for the tool TXU Corp., the largest utilized purchase in history.

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Walgreens shares are ne d 8.2 percent this year.