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Walgreens explores going private in what may be the largest LBO ever



Walgreens is testing a health-focused concept in a store in Deerfield, Illinois.

CNBC

The international pharmacy chain Walgreens Boots Alliance is exploring to go private in what may mark the largest utilized acquisition in history, people familiar with the situation told CNBC.

One of the companies looking at a deal is KKR, the people said. KKR has a history with the dealer. In 2007, it bought Alliance Boots in partnership with Stefano Pessina, the then executive chairman of Alliance Boots, and other investors.

KKR remained as an investor after Walgreens announced a two-part agreement to buy Alliance Boots in 201

2. By the time Walgreens bought all Alliance Boots, in 2015, KKR had roughly quadrupled its cash investments, according to media reports at the time.

For Walgreens Boots Alliance, an agreement to go private would be a chance to get out of the public spotlight. Shares of Walgreens have gone over 22% over the past 12 months as both retail and pharmacy businesses are under pressure.

With Walgreens & # 39; market value of approximately $ 55 billion, such a deal would require a large pay cut. Pessina, now Walgreens CEO, has a 16% stake in the company, according to data compiled by FactSet. He could roll over this share to help facilitate a deal.

Walgreens outstanding debt burden, about $ 17 billion, according to the latest legislation, can further complicate the acquisition talks. A number of deals to buy dealers led by private equity companies in recent years have resulted in bankruptcy, including Toys R Us and Payless. These retailers ended up in debt and were unable to make the necessary investments to compete in the midst of a rapidly changing retail landscape.

Walgreens – one of the world's largest pharmacies, with about 9,300 pharmacies – is under its own pressure. Consumers are increasingly shopping for pharmacies like shampoos and vitamins online. Insurance companies pinch pharmacies and pay them less to fill prescriptions.

In response, Walgreens throws costs. The company aims to trim more than $ 1.8 billion by fiscal year 2022. Walgreens earlier this year said it will close about 200 stores in the United States, in addition to the 200 it will close in the United Kingdom

Amid the industry challenges, Walgreens faces peers have looked into partnerships or consolidation. CVS Health and Aetna last year combined a $ 69 billion deal that combined CVS's pharmacy and pharmacy management platform with Aetna's insurance business.

Walgreens explored a deal to buy AmerisourceBergen last year, but early-stage exploration ended without a deal.

In 2015, Walgreens sought to acquire Rite Aid for a $ 17.5 billion deal that appeared to bring 4,600 stores. However, regulators looted the deal to buy 1,932 stores for $ 4.37 billion.

Walgreens is working with investment bank Evercore to see if it can put together a deal, Reuters reported earlier Tuesday. Reuters and Bloomberg previously reported news of a potential deal and sent shares up more than 3%.

Shares closed Tuesday at $ 61.21, up 2.6%.

Walgreens declined to comment Tuesday, saying they do not comment on rumors or speculation. .


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