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Boot meal deals are a British cultural phenomenon. The customer pays one price and gets items sold separately, but costs a little more. Private equity firm Sycamore Partners believes it can do something similar to the Walgreens Boots Alliance, owner of the high street chain.
Sycamore has named its investment in struggling US retailers. Over the years, it has placed big bets on office supply chain staples and faded fashion brands like Anne Taylor and Talbot. The New York buyer currently offers Walgreens up to $23.7 billion. Includes debt and potential future payments.
At first glance, Sycamore has gotten a bargain. The 12,700-story transatlantic empire also includes the US Duane Reed Store, Walgreens had a market valuation of $100 million just a decade ago. In 2019, acquisition group KKR held talks to acquire the company’s capital for approximately $560 billion. Sycamore’s bid values it as roughly $10 billion, or nearly $13 billion, if certain parts can be sold successfully.
Sometimes assets can get cheaper. Walgreens reported a net loss of approximately $9 billion in 2024. LSEG estimates that its balance sheet is under burden.
There is also no room for extra borrowing. Last year, the group already paid $482 million in interest, and analysts hope Walgreens will generate negative free cash flow this year with very modest revenue growth and a thin operating margin of wafers.
The fact that Walgreens chairman and biggest shareholder Stefano Pessina is above his 17% stake is helpful. And Sycamore will definitely be splitting up the company and selling units to drum up cash. The company plans to offload its primary care business, including village medical and CityMD.
Are there any other bit buyers? Walgreens tried to offload the boots in 2022 but failed. Sales have improved since then, but the economic uncertainty caused by high interest rates and Trump’s tariff war could keep potential buyers on the sidelines.
Still, it’s worth the shot. Being a public company does little to solve many of Walgreens’ problems. Stocks have fallen nearly 90% over the course of 10 years. Ownership of private equity takes the slow, painful financial decline of Walgreens and lets it escape from public view.
Again, buyers are paid high fees to take extraordinary risks. And Pessina, who has transformed a family business into a global giant for decades, needs to consider his legacy. Perhaps Walgreens is the ideal patient for experimental treatment.
pan.yuk@ft.com
john.foley@ft.com
