The Walgreens Boots Alliance (WBA) is reaching out to potential buyers for a sale of the Boots drugstore chain worth £7 billion ($8.8 billion) as per reports from Bloomberg. The Illinois-based company is said to be working with advisers to hold early-stage discussions with prospective bidders.
WBA was formed in 2014 after Walgreens purchased a 55% stake in Alliance Boots for a total acquisition price of $4.9 billion. At the time of the 2014 merger deal for Boots, the company was valued at about £9 billion ($11.3 billion). Speculation of sale has been looming for some months, after reports last year that WBA was seeking a £7 billion ($8.85 billion) London listing of Boots, wishing to focus on business in the US.
In 2022, WBA abandoned sales plans for Boots that were expected to bring in over $6 billion, after failing to secure its desired valuation for the business during an unsteady credit market. WBA had been in talks with a consortium between Reliance Industries Ltd. and Apollo Global Management Inc., but the parties could not find common ground for a sales figure. “Market instability [is] severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots,” Walgreens said at the time.
The news of a potential sale comes after WBA shut down over 300 Boots doors in the UK last year to optimize its current locations, despite 13.4% sales growth in the three months leading up to the closures. The store closings came as part of what James Kehoe, Executive Vice President and Global Chief Financial Officer at WBA, called a “transformation plan.” “As you have seen, we are accelerating our portfolio optimization to further simplify the business,” he said.
Just a few weeks ago, Boots offloaded its pension scheme to Legal & General, a financial services company, in a £4.8 billion ($6 billion) deal. The choice was said to be made as a forerunner to the upcoming sale, leaving it to Legal & General to pay Boots workers' pensions directly to them.
After news of the sale broke, Walgreens stock jumped 7.2% to $18.43, some positive news for the business that saw sales plunge 42% over the past year as it struggled to restore growth. The company put this plummet down to reduced consumer spending on nonessential items, leaving it to cut its dividend by half and lower its profit outlook.
A sale of Boots by WBA would lead to a separation of one of the largest alliances in the beauty industry, allowing WBA to focus on the US market and Boots to venture into a new chapter in British beauty business. While it is not certain whether or not the sale will go through, it will be interesting to see who has eyes on the retail chain this time around.
