Walgreens goes private

Over the last decade, Walgreens has faced significant financial difficulties, seeing its market value drop from over $100 billion in 2015 to below $8 billion in 2024. For the entire 2024 fiscal year, Walgreens reported a net loss of $8.6 billion, almost triple the previous year's loss.

In March, Sycamore Partners announced that it had agreed to purchase Walgreens in a $10 billion deal, taking the company private after almost 100 years.

"Going private is going to let us be more focused, more nimble, more long-term in our decision-making, in the context of the challenges that we continue to face," said Tim Wentworth, who was Walgreens' CEO at the time. "That gives us both the time and the ability to focus in a way to transform Walgreens."

In August, Sycamore finalized its acquisition of Walgreens and appointed Mike Motz as the company's new CEO, with Wentworth remaining on the company's board. Sycamore will also split the company into five separate businesses: Walgreens, The Boots Group, Shields Health Solutions, CareCentrix, and VillageMD.

"As a private organization, alongside our dedicated team members, we are renewing our focus on our core pharmacy and retail platform, our stores and our customer experience — building on the progress that's been made," Motz said.

What's next for Walgreens?

According to some industry experts, the private equity takeover was the right decision for Walgreens since retail health has faced numerous headwinds over the last few years.

Michael Greeley, cofounder and general partner of Flare Capital Partners, said that it was "a terrific move to disaggregate [Walgreens'] disparate assets," especially since its struggling retail business was pulling down high-performing assets like Shields and CareCentrix.

"Ultimately, the five businesses all have different margin profiles, cost structures, and opportunities for success: the company never was able to capitalize on the reciprocal value between each business," Templeton said. "By comparison, CVS did [this] with its acquisition of Caremark, which lowered its drug costs, and the merger with Aetna created a closed loop on customer acquisition and negotiation."

Cherokee Layson-Wolf, a professor in the department of practice, sciences, and health outcomes research at the University of Maryland School of Pharmacy, said her biggest concern was how the deal would impact patient access to pharmacies.

For example, Sycamore may decide to consolidate pharmacy locations and rely more on central fill locations. Currently, Walgreens has 11 central fill locations that send prescriptions to over 4,500 stores, but Wentworth in January said the company wanted to increase that number to around 6,000 stores this year.

More central fill locations could lead to fewer pharmacies, which could affect patients' ability to see a pharmacist, Layson-Wolf said. Walgreens has also already announced the closure of 1,200 pharmacies, and even more closures could come under Sycamore's ownership.

"They'll close stores that are not profitable or that don't have a potential to generate free cash flow. And the concern is, do they start to close stores in markets that create healthcare deserts?" Greeley said.

According to PESP, pharmacy closures "disproportionately impact low-income, rural, and minority communities and can create 'pharmacy deserts' where patients lose access to essential medicines and services." More store closures would also likely mean more layoffs, adding to the hundreds of cuts Walgreens already announced last year.

In addition, Parr noted that Sycamore's experience has largely been in retail, not healthcare. Several of the retail businesses Sycamore has acquired have also gone through increased store closures, layoffs, and bankruptcies.

"This is not just a typical retail takeover, which is what Sycamore is used to," Parr said. "This is a much bigger behemoth for them to manage, and Sycamore already has a background of bankrupting smaller retail companies. So if that same trajectory happens with Walgreens, it's going to be even more devastating than a Nine West going bankrupt."