Shares of Walgreens Boots Alliance ( WBA ) rose 6% in early trading on Monday with the report. According to Bloomberg, KKR has approached Walgreens for an agreement. The KKR acquisition company is one of the world's largest private equity companies, and its exploited acquisition of RJR Nabisco was cataloged in the book, "Barbarians at the Gate."
Walgreens is currently valued at more than $ 55 billion. Any deal is likely to be made at a premium at that price – and also include the $ 16.8 billion assumption that the retail and pharmacy giant has on its balance sheet.
According to merger research firm Dealogic, the largest private acquisition ever was the purchase of $ 44 billion (including debt) by Texas corporation TXU of KKR ( KKR )
another private equity firm TPG and Goldman Sachs ( GS )
in 2007. TXU went bankrupt in 201
4, but has since come out of Chapter 11 protection and is now part by the power company known as Vistra Energy ( VST )
Walgreens had no comment on CNN Business about the Bloomberg report or a Reuters report last week saying it appears to be going private. KKR was not immediately available for comment.
Reuters reported that Walgreens is working with investment bank Evercore Partners ( EVR ) on a potential agreement. Evercore declined to comment on CNN Business about this report.
But a purchase of KKR might make sense: KKR has already made a deal with the top investor in Walgreens when it took the UK-based pharmacy chain Alliance Boots private in 2007 for $ 22 billion.
KKR worked with the then Alliance Boots Deputy Chairman Stefano Pessina, who was the largest shareholder in Alliance Boots, on the deal. Pessina is currently Executive Vice President, CEO and largest shareholder in Walgreens. Pessina owns a more than 16% stake in the company through its investment company Alliance Santé Participations.
An acquisition would also help stop the bleeding in the stock price of Walgreens.
The share is still almost 10% this year – despite the recent merger reports. That makes Walgreens the third worst performer in the Dow in 2019 behind only the pharmaceutical giant Pfizer ( PFE ) and industrial conglomerate 3M ( MMM ) .
Walgreens, which rival CVS ( CVS ), has worn out because of concern that cheaper generic medicines and a sustained decline in reimbursement for drugs from state and federal government plans outweigh the profits.
The company has also been hit by a whim by the Food and Drug Administration. The US regulator put Walgreens "on notice" earlier this year for selling more cigarettes to minors than any other drug store retailer. Walgreens, along with many other major retailers, announced plans last month to stop selling vaping products.
And Walgreens – along with CVS and Rite Aid ( RAD ) – have all been harmed by increased pharmacy competition from Walmart ( WMT ) and Amazon ( AMZN ) who now owns the online pharmacy PillPack. Walgreens are also squeezed in the front end of their stores by retailers Costco ( COST ) and Dollar General ( DG ) .
Brexit uncertainty does not help Walgreens either. The company said during a conference call with analysts earlier this year that sales in Boots UK stores were weak as consumer conditions in the country "remain challenging."