Private equity firm Sycamore Partners finalized its acquisition of retail pharmacy giant Walgreens and plans to split the company up into five separate businesses.
Walgreens, The Boots Group, Shields Health Solutions, CareCentrix and VillageMD will now operate as separate standalone companies, the company said in a press release issued Thursday.
Sycamore is acquiring the business in partnership with Stefano Pessina and his family, who have reinvested 100% of their interests in Walgreens, the company said. Shareholders approved the deal in July.
The companies announced the $10 billion deal in March. Sycamore agreed to pay $11.45 per share for the company, an equity value of about $10 billion, according to The Wall Street Journal. Walgreens said in a press release that accounting for debt and future payouts, the value could reach up to $23.7 billion.
Sycamore tapped Mike Motz as the new CEO of Walgreens, effective immediately.
Motz was formerly CEO of Staples US Retail, a Sycamore portfolio company. Prior to that, he served as president of Shoppers Drug Mart, the No. 1 pharmacy chain in Canada.
The PE firm described Motz as a "seasoned leader with deep experience" who brings a "renewed focus on retail, a customer-first mindset and significant operational discipline to guide Walgreens into its next chapter as a private company."
Motz replaces Tim Wentworth, who will continue to serve as an ongoing Director. John Lederer, a former director of Walgreens Boots Alliance and a Senior Advisor to Sycamore, has been appointed Executive Chairman of Walgreens.
“Today represents an exciting new chapter and a turning point for Walgreens,” Motz said in a statement. “As a private organization, alongside our dedicated team members, we are renewing our focus on our core pharmacy and retail platform, our stores and our customer experience—building on the progress that’s been made.”
Stefan Kaluzny, managing director of Sycamore, said, “Walgreens Boots Alliance, Inc., its companies and its dedicated team members play an essential role in the communities they serve around the world. We look forward to partnering with the management teams at each company, including Walgreens, The Boots Group, Shields Health Solutions, CareCentrix and VillageMD. As standalone companies under private ownership, they will build on their proud legacies to enhance the customer experience and deepen the trusted relationships they have earned with millions of customers around the world.”
With the completion of the acquisition, WBA's common stock has ceased trading and will no longer be listed on the Nasdaq.
In addition to their cash consideration of $11.45 per WBA share, shareholders will receive one non-transferable right to receive up to an additional $3.00 in cash per WBA share from the net proceeds of the future monetization of the company's debt and equity interests in VillageMD, which includes the Village Medical, Summit Health and CityMD businesses.
The PE firm aims to turnaround Walgreens as the pharmacy retail chain has financially struggled in the past few years, battered by headwinds that have struck the retail pharmacy industry as well as challenges at its VillageMD unit.
As part of its ongoing turnaround plan, Walgreens announced a plan last October to close 1,200 stores.
Sycamore Partners made it clear that it planned to sell the VillageMD business. When the deal was announced in March, the company said it is looking to all options to improve the financial performance of the primary care provider and will be forming a committee to explore various avenues.
The VillageMD portfolio includes urgent and primary care chain Summit Health-CityMD after VillageMD bought those assets in a deal worth close to $9 billion in 2022.
Walgreens' healthcare assets including primary care provider VillageMD; Summit Health/CityMD, a provider of primary, specialty and urgent care; CareCentrix, a post-acute and home care provider; and specialty pharmacy Shields Health.
In June, Walgreens reported a 7% jump in sales to reach $39 billion in its fiscal third quarter. The retail drugstore chain swung to a loss in the quarter, which ended May 31, reporting a loss of $175 million, or 20 cents per share, compared to earnings of $344 million, or 40 cents a share, during the same period a year ago. The healthcare segment's operating loss was $64 million in Q3.
For full-year fiscal 2024, Walgreens’ sales grew 6.2% to $147.7 billion, but the company racked up $8.6 million in losses, an increase of 180% compared to 2023. The waning value of the VillageMD business has dragged Walgreens' financial performance and contributed to the company's hefty $6 billion loss in the second quarter of 2024.