Walgreens shares rise on Sycamore Partners deal report
People walk past a Walgreens on November 3, 2024 in Brookline, Massachusetts.
Danielle DeVries | CNBC
Shares of Walgreens The stock rose about 20% on Tuesday after news that the company was in talks to sell itself to private equity firm Sycamore Partners.
Walgreens and Sycamore have discussed a deal that could close early next year, the Wall Street Journal reported, citing people familiar with the matter. New York-based Sycamore would likely sell parts of the Walgreens business or work with partners, the Journal reported.
A Walgreens spokesman declined to comment on the reported conversations.
The report comes at a difficult time for the pharmacy giant. The company's shares fell more than 60% for the year before rising on Tuesday.
Walgreens — under pressure from the transition out of the Covid pandemic, a leadership change, pharmacy reimbursement headwinds and its shaky foray into health care — fell short of Wall Street's earnings expectations for two straight quarters. In particular, Walgreens' pharmacy business is weakening as prescription drug reimbursement rates decline and multiple factors, such as inflation and increasing competition, put pressure on its stores.
The company is trying to regain its footing with a new CEO, healthcare industry veteran Tim Wentworth. Since taking office in October 2023, Wentworth has been committed to reducing costs at Walgreens.
In October, Walgreens announced that it plans to close around 1,200 of its drugstores over the next three years, including 500 in fiscal year 2025. Walgreens has around 8,700 locations in the US, a quarter of which are unprofitable. The company also scaled back its push into primary care by reducing its stake in primary care provider VillageMD.
Walgreens has reportedly been considered a potential private equity target in the past.
In 2019, private equity firm KKR made a roughly $70 billion takeover offer for the company, the Financial Times and Bloomberg reported at the time.
