According to several sources, Walgreens CEO and majority shareholder Stefano Pessina and senior executives have supposedly been testing the waters for a potential leveraged buyout of the Walgreens Boots Alliance
WBA recently had closed meetings with private equity firms, including KKR & Co, supposedly to discuss the financing of an LBO of the mammoth Walgreen Boots Alliance. While details of the actual meeting are scarce, Pessina may likely have been present, as any such deal would be impossible without his backing. There is also speculation that Pessina may be at the forefront of the deal as such a move would be within character, or as Andrea Felsted of Bloomberg puts it, "right out of the Stefano Pessina playbook."
Experts are curious about what benefits such a move would bring, however. While Walgreens has a significant presence on the pharmaceutical market, it has seen stymied growth due to increasing backlash over rising prescription drug costs, with the company stating it expects little growth in the coming year. Currently, there seems to be no conceivable benefit in a transition to private ownership that would help the company alleviate its woes.
With the WBA discussing financing with equity firms and hiring experts to review possibilities for an LBO, how likely is it that the deal will go through? According to the consensus of financial experts: unlikely. Many financial experts have cast their doubts on the possibility of such a significant transaction; put by Bloomberg, the numbers don't add up. Primary concerns revolve around the sheer financial requirements of such a deal, which would require considerable capital and a great deal of restructuring and cost-cutting to reduce overhead after a potential deal went through. The estimated amount of the transaction alone would be $75 Billion, almost twice the size of the current largest LBO, a considerable number that has experts questioning the "sanity" of such a deal.
Sluggish markets also pose a significant danger to the deal; the UK based Boots chain has seen slow sales figures that have required considerable cost-cutting. Additionally, WBA is already facing the consequences for even floating the decision, primarily a fluctuating stock price reflective of the skepticism Wall Street has over the massive buyout.
As of this article, few reliable details are known. The WBA has yet to comment on the deal, and much of what was discussed during the closed meetings between the WBA and equity firms have yet to be released. More key details may help experts better understand how the pharmaceutical giant plans to make the deal work. Still, as of right now, many experts have pointed out that the reality of the company's situation makes the deal untenable.