The $10 billion Walgreens take-private deal with Sycamore: what you need to know

March 11, 2025 | by | 1 Comment

Gimlet EyeWalgreens was too big to fail entirely–but made too many mistakes and remained in too many dying segments. The Gimlet Eye credits Walgreens for making a good deal with private equity firm Sycamore Partners before the wheels came off completely, as has happened to all too many retail-based enterprises.

The deal:

  • The equity value will be $10 billion: $11.45 per share in cash that represents a roughly 8% premium to the stock’s closing price on Thursday ($10.63). Of course, with a deal on the table, shares are up today (10 March) and closed at $11.30.
  • There is an up to $3 bonus per share to shareholders when the VillageMD holdings, including CityMD and Summit Medical, are sold, termed “Divested Asset Proceed Right” or “DAP Right”. This assumes that VillageMD will be sold.
  • How Walgreens is positioning it in their release is a total value of $23.7 billion, which would include net debt, capital leases, present value of opioid liability and Everly settlement, less fair value of all equity investments. (Slightly confusing?)
  • Closing is anticipated as Q4 2025, subject to the usual shareholder approvals (minus WBA chair and 10% owner Stefano Pessina as well as shareholders affiliated with Sycamore Partners) and regulatory approvals–a Federal and state-by-state process. Once closed, Walgreens will be private.
  • Stefano Pessina will hold a share in the company. No other transitions are mentioned at this time.
  • Headquarters will remain in Chicago.

Last week’s (and prior) reports of the three-part carveup of WBA’s assets have, so far, not been confirmed. 

Our Readers have been tracking the multiple and cumulative mistakes that Walgreens has made, including:

  • Maintaining an expensive retail footprint…then doubling down on it in 2020 by integrating into their retail footprint a co-located primary care group practice, VillageMD. Then Walgreens backed VillageMD in buying Summit Medical and CityMD. This Editor estimated, based on public information, that Walgreens sank north of $10 billion into VillageMD since their initial investment of $1 billion in 2020 [TTA 22 Feb 2024]. WBA wrote down in their Q2 2024 $5.8 billion of the investment.
    • Retail context: They not only bought Duane Reade in 2010, but also they bought 1,932 Rite Aid stores in March 2018 for $4.38 billion. 
  • It got caught in the Theranos fraud, investing $140 million but able to claw back about $44 million before the collapse.
  • Pulling a fast one on PWN/Everly Health on their Covid testing contract that just cost them $595 million [TTA 26 Feb]
  • Improper dispensing of opioids and other unlawful prescriptions that violated the Controlled Substances Act (CSA). Since Walgreens then sought reimbursement from Federal healthcare programs, they violated the False Claims Act (FCA). This has now resulted in a Department of Justice civil lawsuit filed in the Northern District of Illinois [TTA 24 Jan]. This could be billions in penalties that someone has to pay.
  • Pharmacist labor actions affected Walgreens’ already unsteady pharmacy operation.

One mistake of omission that industry opiners have pointed to was not buying a pharmacy benefit management (PBM) company, although that could be a dodged bullet as PBMs are now under Federal attack.

Too many habits have changed along with their economics. Prior to 2020, only a seer could have truly forecast that retail pharmacies could be displaced as they were by Amazon Pharmacy (which used to be a small player called PillPack), nor CostPlus, Walmart, and the teleprescribers such as Ro and Hims. The pandemic got retail customers accustomed to using online shopping and home delivery for even the smallest of items like toothpaste. Multiple small HBA (health and beauty aids) brands are profitably and directly sold on YouTube and elsewhere. Another nail in retail–shoplifting and related crime drained profit. For shoppers, stores became threatening, not comfortable, places to spend a little time browsing, going in for milk or cough syrup and walking out with cards, printer ink, candy, shampoo, and ice cream. Another change that few mention is how major supermarkets have also added pharmacies along with expanding aisles of vitamins and major brand HBA, at competitive prices.

Unlike CVS, Walgreens stores tend to be (at least locally to this Editor, meaning NY and NJ), barnlike, oddly organized, hard to browse, and harshly lighted locations with a few registers concentrated in a cattle chute design. CVS is generally (not always) easier to browse and slightly better organized especially at checkout with self-check and register options, as is their pharmacy experience. CVS also benefits from having insurer ties and Minute Clinics in many locations.

What’s ahead for Walgreens? Right now, it has 12,500 retail pharmacy locations across the US, Europe and Latin America with 310,000 employees. Neither Walgreens nor Sycamore is talking, which is reasonable, but the Gimlet Eye can make certain educated guesses. Certainly by 2026 there will be major changes in their retail footprint. Their 5,000 scheduled store closures may look miniature compared to what is coming, with the smallest volume or least well located stores going first and likely what is left of Duane Reade closed. Staff will be cut accordingly and one can anticipate difficulties on their pharmacy side which has already seen some unrest in staffing and management. As earlier noted [TTA 4 Mar], expect sell offs or spinoffs of other assets such as CareCentrix, Shields Health Solutions, the 6% left of their Cencora shares, Boots No. 7 beauty, and Boots in the UK.  

It’s hard to be assured that in a year or two, there will be many local Walgreens (or Boots) to run into for a prescription or Band-Aids, given the generally unsuccessful track record of retail PE and the trends noted above. Sycamore Partners in that area is well regarded, especially in how they turned around Staples, Talbots, and others. But given the rabbits-pulled-out-of-hats in how Sycamore put together their funding and debt financing for Walgreens, and the economics of the private equity model of profitability and ROI in covering management fees, debt service, and asset selloffs–it will be an interesting time for those of us who are healthcare observers. CNBC, MedCityNews, Yahoo Finance (CNN)

More on Sycamore’s 83% debt level in financing the Walgreens deal, and what that could mean, here.

This Just In: Walgreens settles PWNHealth/Everly Health arbitration award for $595 million, reduced from $1 billion

February 26, 2025 | by

A golden bird in the hand for PWN/Everly–and presaging something else for Walgreens? Walgreens has decided to settle with PWN/Everly the latter’s recently upheld near-$1 billion arbitration award for $595 million, about 60%. This amount is payable to Everly in a breathtaking two business days.

The arbitration between PWN/Everly and Walgreens charged Walgreens with breach of contract on their Covid-19 testing services agreement, adding in additional violations of the Latham Act on trademarks and more. The arbitrator’s award of $987 million last March was affirmed by the US District Court for the District of Delaware on 11 February. Walgreens declared it would appeal but stated in their SEC filing that any resolution might take up to two years. More details: TTA 12 Feb

Was this a ‘Deal Deal’ as a prelude to a more significant endgame for Walgreens? For this Editor strictly speculating, Walgreens not appealing but settling this quickly, agreeing to pay a reduced amount in record time, may point to something larger. If coupled with the speculated revival of the Sycamore Partners buyout deal [TTA 19 Feb], if Walgreens is actively in sale mode, they want to be as attractive as possible. That means taking off the table ongoing lawsuits and pending settlements that are future obligations–presenting the cleanest picture possible of and reducing their Mound of Misery. Where they can, like with Everly, it’s settling for less now, versus dragging out an appeal for two years that will be more costly to litigate, for example in legal fees and award interest, if almost certainly upheld again. These become future obligations for a buyer and make for more unattractiveness. It also follows on VillageMD/CityMD’s recent settlements with New York State and the Department of Justice [TTA 12 Feb] and state-level opioid settlements, though in January the DOJ filed a civil lawsuit against Walgreens on opioids and other meds violating the Controlled Substances Act [TTA 24 Jan] . Reuters, Crain’s Chicago Business

Walgreens’ misery level rises some more: Federal court affirms $987M award to PWNHealth/Everly Health. Plus selling $295M in Cencora shares, drawing down to 6%.

February 12, 2025 | by

Walgreens’ Mound of Misery grows ever higher in two more ways. The US District Court for the District of Delaware ruled yesterday that last year’s arbitration award of $987 million to PWNHealth stands.

Walgreens originally contracted exclusively with PWNHealth’s Everly Health Solutions’ telehealth physician network in April 2020 to order Covid-19 tests that consumers requested through the Walgreens website. PWN/Everly had, with its network, the ability to administer nationwide Covid-19 testing including labs and follow-up. However, Walgreens in 2021 started to divert tests to their own pharmacists, while continuing to use the Everly trademarked logo and displaying that testing would be done by PWN/Everly’s network. This breached the exclusive Master Services Agreement (MSA) with PWN/Everly. Walgreens terminated the MSA effective 1 June 2022. PWN/Everly on 10 June 2022 then initiated the arbitration with the American Arbitration Association alleging breach of contract, a violation of the Latham Act on trademarks, plus additional breaches and violations. In March 2024, the arbitrator awarded PWN/Everly $987 million. This was 12 times the contractually specified $79 million in damages. Arbitration text and decision in Jus Mundi

Immediately after the arbitration, Walgreens filed suit in Delaware to vacate the ruling on the grounds that it contravened the contract’s cap on damages and that the arbitrator’s decision was “egregious and improper”.

The Federal judge in yesterday’s decision upheld the arbitration decision, finding that the arbitrator had the authority to interpret the contractual language and determine damages. The judge found no evidence that the arbitrator exceeded his authority or showed bias. Walgreens is, of course, appealing the decision in the US Court of Appeals for the Third Circuit. In its Securities and Exchange Commission (SEC) filing, Walgreens stated that it disagrees with the court ruling but that the appeal may take another two years. “There can be no assurances as to the outcome”. PWNHealth, of course, is “pleased with the court’s well-reasoned decision confirming the arbitration award.” Reuters, Crain’s Chicago Business, FierceHealthcare  

Walgreens needs some fast cash. One investment that they have been gradually cashing out is their interest in Cencora, a drug distributor originally called Amerisource Bergen. Last Thursday’s drawdown involved Cencora repurchasing about $50 million worth of its stock from Walgreens, with Walgreens selling about $265 million worth of additional shares. Deducting $20 million in early settlement fees, the net proceeds were $295 million. Walgreens (WBA) states that it will be used primarily for debt paydown and general corporate purposes. WBA’s stake in Cencora has been reduced to 6% from the earlier 10%. Walgreens has been steadily cashing out its Cencora interest with three sales in 2024 totaling 5% of shares [TTA 7 July 2024].  Release, Healthcare Dive, Crain’s Chicago Business

Given January’s Department of Justice (DOJ) civil suit over improper dispensing of opioids and and other unlawful medications over more than a decade, with possible penalties in the billions, Walgreens’ Mound of Misery is approaching Chicago’s Willis Tower (the former Sears Tower) heights.

Deals and news roundup: Ginger’s $100M, myNEXUS to Anthem, Everlywell snaps up PWN, Amwell’s banner year for revenue–and loss, VA reviews Cerner rollout, voice visits for MA, GE’s vScan goes wireless, uBiome founders indicted

March 27, 2021 | by

Deals–and news–are piling up like Easter eggs before the hunt. Mental health and cognitive digital therapy scored another raise with Ginger‘s $100 million Series E to fund expansion into health plan and government partnerships. Blackstone Growth led the round. Total funding to date is $220 million. It’s entered unicorn status with a valuation just north of $1 bn. Ginger to date has concentrated on corporate mental healthcare. From being an ugly duckling only a few years ago, digital mental therapies are this year’s ‘it’. But competition is fierce: the traditional telehealth companies such as Teladoc, Doctor on Demand, and Amwell are closing in on the early entrants such as AbleTo. Direct-to-consumer models like Talkspace; UK/Ireland’s SilverCloud Health; and Lyra, Spring Health, and Happify, which just closed a $73 million Series D, all step out with slightly different ‘differentiators’ but target the same companies, health plans, and health systems. FierceHealthcare, Ginger release. 

Home health is also another former ugly duckling transformed into a swan. Anthem is acquiring home health/nursing management company myNEXUS, which manages home-based nursing services for 1.7 million Medicare Advantage members across 20 states. Their digital authorization and visit management couples with a nationwide network of providers and nursing agencies for local care. Exiting myNEXUS are private equity investors led by New York’s WindRose Health Investors, after four rounds and a conservative $31 million in funding (Crunchbase). Neither terms nor management transitions were disclosed. myNEXUS will join Anthem’s Diversified Business Group. FierceHealthcare, release.

Home testing+telehealth company Everlywell (not connected with the Everly Brothers) has a different take on home health. They are now integrating their self-test kits with fully owned lab testing. New acquisitions PWNHealth and its subsidiary Home Access Health Corporation will join Everlywell in Everly Group. PWN was Everlywell’s main telehealth partner and diagnostic testing partner since 2016. It will become Everly Health Solutions with their testing data kept separate from Everlywell’s. Home Access was PWN’s self-collected lab test company. Everly Health now will support more than 20 million people annually in all 50 U.S. states, Canada, and Puerto Rico. Acquisition terms were not disclosed. PWN’s CEO will take a seat on the Everly Group board to assist integration. Valuation is now estimated at $2.9 bn.  Mobihealthnews, Everly release, Bloomberg News

And in other news…

Amwell reported a Very Good Year in their telehealth services, with visits growing to 5.9 million from 2019’s 1.1 million. Total revenue was up over 65 percent to $245.3 million. However, profitability continues to be elusive, with net loss almost equaling revenue. Release

The Department of Veterans Affairs (VA) finally announced a review of the Cerner-Leidos EHR integration. Back in February, VA was hanging tough on the rollout after the GAO report questioning its wisdom and recommending postponement until high severity issues were corrected. Secretary Denis McDonough, new VA head, has directed the undertaking of a 12 week strategic review without pausing the project. Taking bets on that 12 weeks! Healthcare Dive

Payers and their lobbyists are supporting a newly reintroduced House bill that would permit telephonic-only telehealth visits to be reimbursed for their Medicare Advantage plans after HHS closes the pandemic period. There is considerable information that video/audio virtual visits still have limitations with the 65+ group, clustered around high-speed internet or good data connections, smartphones, and computers with cameras, making video visits difficult or impossible. Which begs the question about continuing coverage for those on Original Medicare. Healthcare Dive

Those readers with long memories will recall GE Healthcare’s heralded introduction of the VScan handheld clinical-grade ultrasound device–back in 2010, complete with Eric Topol rave and demo. Not much has been heard from GEHC since till this month, and other competitors, such as the Butterfly IQ from 4Catalyzer, have made handheld ultrasound common and affordable. GEHC announced Vscan Air, a fully wireless version that connects to iOS or Android. It was FDA cleared in November 2020 and will be shipping its dual-headed probe and accessories starting 1 April for a US-listed target price of $4,495. GEHC page (with the cute domain vscan.rocks), Mobihealthnews

And in our Scandal Sheet section, a Federal grand jury in the Northern District of California has indicted the founders of now-bankrupt uBiome on 40-odd counts encompassing conspiracy to commit securities fraud, conspiracy to commit health care fraud, money laundering, and identity theft. Separately, the Securities and Exchange Commission (SEC) also filed charges. Between 2016 and 2018, uBiome had raised $100 million through a Series C, and was likened to Theranos, after its fall, in the Big Claim (‘inventing the microbiome industry’). Its business was analyzing the DNA of fecal and other biological matter to sequence the bacteria of the body’s microbiome. Starting with low-cost, limited data comparison for at-home tests, the founders progressed to claiming to doctors that their diagnostic tests were clinical-quality and would be reimbursed by payers. Payers did–for awhile–and the investors piled in. By 2019, the wheels fell off their scheme and the FBI came knocking at their Silicon Valley offices after the founders cashed in. Chapter 7 followed in late 2019. The Register reports that the two married founders are on the run, whereabouts unknown. US Attorney’s Office release, SEC filing (PDF)