Walgreens could sell to private equity — and investors are thrilled

• Walgreens is in talks to sell itself to private equity firm Sycamore Partners.
• The pharmacy chain's stock rose 18% after the news.
• Walgreens plans to close 1,200 stores amid competition from big-box and online retailers.

Walgreens is considering selling itself to a private equity firm, in a deal that could be done early next year.

Walgreens is in talks with Sycamore Partners to take the publicly listed company private, The Wall Street Journal reported Tuesday, citing people familiar with the matter.

The pharmacy mega-giant's stock shot up 18% on Tuesday following the report, which raised the company's value by about $1.5 billion, to $9 billion.

Privatization is a positive sign for shareholders because investors taking the company private typically offer them a premium above the stock's current market value.

A deal with Sycamore, which invests in retail and consumer brands, could include selling off parts of Walgreens' business or working with its partners, according to the Journal. Private equity firms typically buy companies they see as struggling and work to make them profitable before selling them as a whole or in parts after a couple of years.

Sycamore Partners and Walgreens declined to comment.

Walgreens' stock has been on a rout since hitting a peak in mid-2015. It has slipped 60% since January. The chain's poor performance is part of the broader "retail apocalypse" — the decline of convenience and pharmacy stores hurt by online shopping and poor service.

In the US, Walgreens has 240,000 employees and nearly 9,000 stores in all 50 states, per the company's website.

Three of the company's last four quarters have been unprofitable. It reported a $3 billion loss for the quarter that ended in August.

In October, Walgreens announced it would be closing 1,200 stores over the next three years, saying that some 25% of its outlets weren't profitable. The same month, rival CVS, which has shuttered hundreds of stores over the past few years, said it planned to slash nearly 3,000 jobs to cut costs. Rite Aid, another drugstore chain, also closed a slew of stores after filing for Chapter 11 bankruptcy protection in late 2023.

These pharmacies are competing with big-box stores like Walmart and Target, as well as cheaper options like Dollar General, which has been working to win over budget-conscious consumers. The more expensive and less convenient pharmacies become, the more customers defect. Walgreens and CVS have also been hurt by cannibalization — store sales hurting because there is an identical one nearby, splitting customers.

In 2020, Sycamore's $525 million deal to acquire a 55% stake in Victoria's Secret fell through. Parent company L Brands announced that it had come to a "mutual agreement" with Sycamore to "terminate" the company's previously agreed-upon sale of Victoria's Secret.

At least one other private equity firm has unsuccessfully tried to take Walgreens private. In 2019, various outlets reported that KKR approached the drugstore for what would have been the largest such buyout, but the deal did not go through.