All that ‘deck clearing’ could be leading to a ‘deal deal’. Late Monday reports in both The Wall Street Journal and Bloomberg News (both paywalled) confirmed last Thursday’s and CNBC’s report the week prior [TTA 27 Feb, 19 Feb] that Sycamore Partners and Walgreens Boots Alliance were getting verrrry close to a deal for WBA. The numbers: $11.30 a share to $11.40 a share, cash, or about $10 billion. Today’s price for WBA shares ticked up to $11/share, giving it a market cap of about $9 billion.
The deal, if on, could be announced as early as this coming Thursday.
As Thursday’s reports intimated, the Sycamore plan would
- Take Walgreens private on closing
- Split WBA into three parts or more. Sycamore would keep the US retail side, and sell or spin off the rest.
WBA’s holdings include the Boots chain in the UK, the Boots beauty brands such as No. 7, US drugstore chain Duane Reade, and the rest of US Healthcare: VillageMD, CityMD, Summit Medical, and CareCentrix. Those sources allegedly familiar with the advanced discussions said all of those could be sold or spun off. VillageMD is already on the block. Sycamore had already lined up the financing based on earlier reports.
Mum was the word from both Walgreens and Sycamore; talks even at advanced points can derail in this Perils of Pauline (left above) scenario. Analysts weren’t jumping for joy either. From MarketWatch: “Last week, Deutsche Bank analyst George Hill warned that Walgreens’ stock had run up too high in acquisition anticipation, giving a $9 price target. “The deal strikes us as incredibly complicated and unlikely to be consummated at a premium to the current share price,” Hill said in a note.”
Readers following the WBA story have noticed the “cleanup on aisle 5” activity going on for the past few weeks. The PWNHealth/Everly Health near $1 billion arbitration award against Walgreens for breach of contract was settled for $595 million last week versus appealing [TTA 26 Feb]. Other ‘straws’ were VillageMD/CityMD’s recent settlements with New York State and the Department of Justice [TTA 12 Feb], and the suspending of Walgreens’ stock dividend after 91 years.
It’ll be either on, off, or still being discussed by the end of this week. Crain’s Chicago Business
Update/Breaking: Sycamore is squaring away at least $12 billion of debt financing with HPS Investment Partners and Ares Management Corp. notably vying for the privilege. Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., UBS Group AG and Wells Fargo & Co. are also working on financing proposals, according to Bloomberg News. Different parts of WBA’s business would receive loans, such as HPS leading a $2.5 billion first-lien term loan to specialty pharmacy Shields Health Solutions and a $4.25 billion combination of short term loans and bonds to finance Boots. It’s one large and complex package for Sycamore. For so many specifics to leak out, the deal is likely very near, either end of week or next. Crain’s Chicago Business,
Updated Thursday–the Walgreens-Sycamore sale is agreed to. Details to come.
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