Since December, rumors have floated around that Walgreens was going to be acquired by private equity (PE) firm Sycamore Partners. And while analysts told Healthcare Brew at the time that it was unlikely to happen, the tides appear to have turned in the PE company’s favor.
On March 6, Walgreens Boots Alliance announced in a press release that it had signed a definitive purchase agreement with Sycamore for up to $23.7 billion. However, when Walgreens’s debts and assets to be potentially divested are taken out, the total sale price is actually closer to around $10 billion, per the Wall Street Journal, turning the retailer into a private entity after nearly a century as a public company.
This is a far cry from its peak market cap of $106 billion in 2015, though up 29% from its lowest point last year. Walgreens’s stock jumped to $11.17 from $10.63 when news of the sale broke, following a 5% bump to $10.83 early last week when rumors started recirculating about the potential sale.
Rocky roads for retail pharma
For anyone who’s been paying attention to the retail pharmacy space in recent years, this news perhaps doesn’t come as a shock.
While this latest development is on the heels of a stronger Q1 2025 earnings than analysts had anticipated, Walgreens still reported a net loss of $265 million. That followed last year’s Q4 earnings announcement that it would close 1,200 stores and lay off more than 250 employees after a $3 billion loss and 63% stock decline.
“When you look at some of the struggles that Walgreens has had, a lot of it is related to underperforming financially compared to shareholders’ and investors’ expectations, so not having to be upheld to that scrutiny and report quarterly earnings, I think, is a positive for Walgreens,” Rajiv Leventhal, senior analyst of digital health at market research company eMarketer, told Healthcare Brew.
Walgreens has struggled as competition grew in the space, especially as consumers started purchasing more goods through e-commerce rather than brick-and-mortar. Data from insights researcher Unacast shows that retail pharmacy foot traffic began its decline at the end of 2022 as Covid-related demand dropped off.
And this isn’t exactly new, Leventhal added. Retail pharmacies were struggling pre-pandemic, but “they had this sort of false hope that they could become a medical service destination for patients because of this short-term Covid boost,” he said.
Because of this, Leventhal predicts the pharmacy side of drugstores, which can stay afloat because consumers need places to pick up prescriptions from, will remain largely the same while the commerce part will need to change.
It takes a village
Much of Walgreens’s debt ($3.4 billion) comes from its primary care arm VillageMD, which has been on the chopping block since executives said last August that they were considering a sale.
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Walgreens acquired VillageMD in 2021 for $5.2 billion. But there have been quite a few hiccups since its acquisition, including the closure of 160 VillageMD clinics after a $6 billion net loss in Q2 2024 and its longtime CEO stepping down at the end of last year.
According to Leventhal, this is largely due to the fact that “consumers don’t want to get care at a retail location,” especially post-pandemic, when they have telehealth or in-person doctor visits as options.
Both experts agreed that among Sycamore’s first actions will likely be selling off VillageMD.
“I think the breakout of VillageMD, and the alternative financing arrangement for investors for VillageMD monetization, shows the somewhat urgency to potentially divest,” Cherny said.
Per the March 6 press release, Walgreens could sell its VillageMD and Summit Health-CityMD properties for up to $3 per share, for a total of $2.7 billion.
The PE of it all
Wentworth noted in the release Sycamore’s “strong track record of successful retail turnarounds.” According to the March 6 reporting from the WSJ, this is the biggest deal the PE company has taken on, and there are reportedly discussions about financing Walgreens’s business divisions separately.
“There’s been other private equity involvement in various different healthcare services. This is the largest one that we’ve seen in some time,” Michael Cherny, senior managing director of healthcare technology and distribution at investment bank Leerink Partners, told Healthcare Brew.
Recent data from market data research company PitchBook shows that PE activity slowed as inflation rates increased. After a 2021 peak of 1,542 PE deals, the number of deals dropped to 972 in 2023, sinking 60.4% in total deal value during that time. But a PitchBook analysis shared with Healthcare Brew showed this buyout would be among the largest in healthcare since the 2008 recession.
“Sycamore is not traditionally a healthcare investor, and I don’t view this deal as being predictive for further buyout activity in healthcare broadly,” Aaron Degagne, senior healthcare analyst at PitchBook, told Healthcare Brew in an email. “Still, PE interest in consumer health has been rising.”
Sycamore Partners and Walgreens declined to provide additional comment to Healthcare Brew.