Walgreens
Boots Alliance is in talks with private equity firm KKR to take the drugstore
chain private in what could be one of the largest leveraged buyouts, Bloomberg
reported Monday.
New
York-based KKR has approached Walgreens about a proposal to potentially buy out
shareholders of Walgreens, unnamed sources told Bloomberg, but it is unclear
whether the proposal is feasible because of the large amount of financing
required. The two companies could decide not to pursue a deal, said people who
asked Bloomberg not to be identified.
If a deal
were to come to pass, it would reunite Walgreens Chairman Stefano Pessina with
KKR. In2007, they joined forces to take European pharmacy company Alliance
Boots private.
Walgreens
and KKR declined to comment.
News broke last week that
Deerfield-based Walgreens has been exploring a potential deal to take the
company private as the pharmacy chain grapples with shifting consumer habits
and pressures on its pharmacy business.
The step
would remove the company from the public eye and could make it easier to focus
more on in-store health services, which could draw in customers and better
position Walgreens to compete with CVS Health,
analysts said. It would mean the retailer and pharmacy would not have to answer
to shareholders for the first time since 1927 as well as not abide by the
regulatory reporting requirements of publicly traded firms.
KKR was
founded in 1976 by best friends and first cousins Henry Kravis and George
Roberts. They were joined by their mentor, Jerome Kohlberg, who left the firm
in 1987 over differences in buyout strategy. Kravis and Roberts became known
for their aggressive, often hostile, takeovers of large conglomerates.
Kohlberg, who died in 2015, preferred smaller deals and a more friendly
approach, according to his obituary in the New York Times.
The firm
is perhaps best known for its $25 billion hostile takeover of food and tobacco
giant RJR Nabisco in 1986, a deal scrutinized by Congress for allegedly
avoiding taxes and contributed to KKR becoming the poster child for Wall
Street’s buyout-crazy, debt-driven ’80s. That same year, the company was behind
big deals such as the purchase of Beatrice — at the time the largest leveraged
buyout in history — and grocery giant Safeway. Other big KKR deals during the
1980s included battery maker Duracell and grocery store Stop & Shop
In 2007,
KKR and other investors, including Pessina, took European pharmacy Alliance
Boots private. Five years later, in an effort to to expand its global
footprint, Walgreens announced plans to acquire Alliance Boots, which would
become Walgreens Boots Alliance. KKR reportedly pocketed $7.3 billion when the
two-part deal was completed in 2015.
In
September 2010, KKR went public.
Walgreens
has a market cap of about $53 billion and $16.8 billion of debt. That means
taking it private would top the largest leveraged buyout in history: the 2007
sale of utility TXU Corp. to KKR and TPG, which was worth about $45 billion
including debt, according to data compiled by Bloomberg.
The news
comes weeks after the company laid off employees and
said it won’t pay annual bonuses this year as it works to increase its
cost-cutting goal to $1.8 billion annually. Walgreens also previously announced
plans to close 200 of its stores and said it would eliminate health insurance
for a number of eligible retirees after this year.
Walgreens
has more than 18,750 stores worldwide.
No comments:
Post a Comment