Following discussions with some of the world’s largest private equity firms about putting together what would be the largest ever leveraged buyout, US drug store chain Walgreens Boots Alliance has been exploring whether to go private.
Walgreens has mandated investment bank Evercore Partners,although sources stress that a deal is far from certain.
Many private equity firms have pushed back on the idea, concerned about Walgreens’ business prospects and the challenges of financing a deal expected to be valued at US$55bn, the sources add.
Walgreens chief executive Stefano Pessina, who is the company’s largest shareholder with a 16% stake, could roll his equity into the deal to help finance the transaction
Walgreens has also considered divesting some of its assets, such as its 27% stake in drug wholesaler AmerisourceBergen to provide more funding, according to one source.
Many analysts question whether such a large leveraged buyout is possible.
Baird analyst Eric Coldwell writes in a note: “Given poor industry fundamentals, seemingly never-ending margin pressures faced in the healthcare supply chain, and, let’s face it, ongoing uncertainty about unpredictable items such as opioids exposure, we would struggle to see a monster premium beyond this current run-up (in the stock).”