Walgreens In Buyout Talks With Private Equity Firm KKR: Report

DEERFIELD, IL — Executives at Walgreens Boots Alliance have received a formal approach from the private equity firm KKR to take the company private in what would be the largest leveraged buyout in history, Bloomberg reported Monday.

The international pharmacy chain has over 18,750 in 11 counties, with about 9,300 stores in the U.S., as of September. Its market value is about $56 billion and it has $16.8 billion in debt, according to regulatory filings.

Walgreens shares were up more than 6 percent following the Bloomberg report, which cited people familiar with the matter who asked not to be identified and cautioned there was was no certainty the negotiations would lead to a formal takeover offer.

Last month, the company laid off an undisclosed number of employees at its Deerfield headquarters and said it would not pay annual bonuses this year because it failed to hit revenue targets. It announced plans earlier this year to shutter about 200 stores in the U.S.

Last week, Reuters reported Walgreens has held preliminary discussions with several of the biggest private equity firms about putting together the deal and asked investment bank Evercore Partners to explore the feasibility of the deal, which would likely require several large private equity firms to team up. Many firms suggested financing challenges and the company's business prospects make such a deal a hard sell, according to Reuters.

Related:
Walgreens Lays Off Undisclosed Number Of Employees In Deerfield
Over 1,000 Walgreens Workers Leaving Deerfield
200 U.S. Walgreens Stores To Be Shuttered In Cost-Cutting Campaign
Walgreens Moving Some Tech Jobs From To Chicago

In the past year, Walgreens has seen its shares lose about 22 percent of their value over the past year, CNBC reported last week, pointing out many private equity-led buyouts of retailers, such as Toys R Us and Payless, have led to bankruptcies.

When compared to a control group, a study found 10 times more firms go bankrupt after a leveraged buyout — when a company is purchased using debt that gets assumed by the acquired company— and a report published earlier this year linked leveraged buyouts in the retail sector to the loss of 1.3 million jobs.

Stefano Pessina, Walgreens chief executive officer, holds 16 percent of the company and is its largest shareholder, according to Bloomberg. He previously partnered with KKR to take buyout Alliance Boots in 2007 in a deal that generated roughly $7 billion on a $2.1 billion investment. This time, Walgreens would need to sell $55 billion in debt, Bloomberg reported, which the head of another private equity firm described as a "huge stretch."