Walgreens tests a health-oriented concept in a store in Deerfield, Illinois.
The Walgreens Boots Alliance international drug retailer is exploring how it can become private to achieve the largest leveraged buyout in history people are familiar with. The situation told CNBC.
One of the companies considering a deal is KKR, people said. KKR has a history with the retailer. In 2007, the company bought Alliance Boots in partnership with Stefano Pessina, the then CEO of Alliance Boots, and other investors.
KKR remained an investor after Walgreens announced a two-part agreement to acquire Alliance Boots in 201
For Walgreens Boots Alliance, a deal to become private would be a chance to get out of the public headlights. Walgreens shares have fallen 22% in the last 12 months as both the retail and pharmacy businesses come under pressure.
With Walgreens' market capitalization of around $ 55 billion, such a deal would require a high paycheck. Pessina, now Walgreens' CEO, has a 16% stake in FactSet. He could extend this stake to facilitate a deal.
Walgreens' outstanding debt of approximately $ 17 billion could complicate the acquisition talks, according to recent regulatory requirements. A number of retail buying businesses, which have been led by private equity firms in recent years, led to bankruptcy, including Toys R Us and Payless. These retailers were plagued by debt and were unable to make the necessary investments to compete in a rapidly changing retail environment.
Walgreens – one of the largest pharmacies in the world with around 9,300 drugstores – is under its own pressure. Consumers are increasingly shopping for drugstore staple foods such as shampoo and vitamins online. Insurers squeeze out pharmacies and pay less for completing recipes.
Walgreens then reduces the costs. The company aims to save more than $ 1.8 billion by the 2022 fiscal year. Walgreens announced earlier this year that it will close about 200 stores in the US, in addition to the 200 stores in the UK.
Given the challenges the industry faces, Walgreens peers have explored partnerships or consolidations. CVS Health and Aetna signed a $ 69 billion contract last year that combined the CVS platform for managing pharmacy and pharmacy services with Aetna's insurance business.
Walgreens considered a purchase agreement for AmerisourceBergen Agreement last year.
In 2015, Walgreens attempted to acquire Rite Aid in a $ 17.5 billion deal that would generate 4,600 deals. However, the regulators reduced the deal to $ 4,37 billion for a purchase of 1,932 stores.
Walgreens is working with investment bank Evercore to see if a deal can materialize, Reuters reported Tuesday. Reuters and Bloomberg previously reported a potential business where equities rose more than 3%.
Equities closed at $ 61.21 on Tuesday, up 2.6%.
Walgreens declined to comment on Tuesday because they did not comment on rumors or speculation.