KKR has formally approached pharmacy giant Walgreens Boots Alliance, the parent of the Boots pharmacy chain, about what could be the biggest-ever leveraged buyout, sources said.
The New York-based private equity firm has been preparing a proposal to take Walgreens Boots private, said the sources.
Walgreens Boots, led by chief executive officer Stefano Pessina, has been reviewing a potential deal with a financial adviser to take the company private amid buyout interest, it was reported last week. No final decisions have been made, and Walgreens Boots and KKR could decide against pursuing a deal, the people said.
Value
A representative for KKR couldn’t immediately comment, while a representative for Walgreens Boots declined to comment.
Deerfield, Illinois-based Walgreens Boots has a market value of about $53 billion (€48 billion)and $16.8 billion of debt. At that size, a take-private of the company would top the largest leveraged buyout in history: the 2007 sale of utility TXU to KKR and TPG, which was worth about $45 billion including debt, according to data compiled by Bloomberg.
Some buyout firms looked but decided against pursuing such a big deal, people with knowledge of the matter said earlier. It’s unclear how feasible the transaction would be, which would require significant financing, according to the people.
This wouldn’t be Mr Pessina’s first ambitious private equity deal with KKR. Pessina previously partnered with the buyout firm to acquire Alliance Boots in 2007. That deal came at the height of the buyout boom and underscored the challenges of financing jumbo take-privates, as banks struggled at the time to find buyers for the loans to pay for that deal.
Mr Pessina (78) took his current role after Walgreen acquired the part of Alliance Boots that it didn't already own for about $15.3 billion in 2014. The company's businesses range from established retail chains in the US and Europe to the lesser-known pharmacy supplier Alliance. He holds a 16 per cent stake in Walgreens Boots, according to data compiled by Bloomberg.
A buyout would give Walgreens Boots time to adapt to a fast-changing retail landscape, free from the quarter-by-quarter demands of public shareholders.
Pressure
The company is under immense pressure from online competitors including Amazon. com, which have chipped away at sales of household and beauty items. While top rival CVS Health Corp has grown into a vertically integrated health-care giant, Walgreens Boots has doubled down on shops, announcing pilot partnerships with retailers including grocer Kroger.
Walgreens Boots is the largest retail pharmacy in the US and Europe, with more than 18,750 stores in 11 countries, according to its most recent annual report. Its wholesale arm has more than 400 distribution centres that deliver to more than 240,000 pharmacies, doctors, health centres and hospitals.
It operates Walgreens and Duane Reade stores in the US and Boots outlets in Europe and Asia. Three-quarters of its revenue stems from the US pharmacy business.
The company had sought to buy rival Rite Aid. In 2017, the companies scrapped the merger amid regulators’ concerns that it would hurt competition in the US drugstore market. Walgreens Boots instead bought roughly 2,000 stores from Rite Aid.– Bloomberg
