Drugstore chain Walgreens Boots Alliance announced on Thursday that it will go private.
The struggling company entered into an agreement with private equity firm Sycamore Partners valued at $10 billion. Sycamore will pay $11.45 per share, a premium of 8% to the stock’s closing price of $10.60 on Thursday. Shares of the company rose nearly 6% in extended trading.
Walgreens shareholders could also receive an additional $3 in cash from future monetization of the company’s debt and equity interests in VillageMD.
The company’s market value has shrunk to just more than $9 billion from almost $100 billion a decade ago as margins on drug prices fell and consumers shifted to cheaper rivals Amazon and Walmart to fill their prescriptions and purchase toiletries.
And when rivals diversified into insurance or prescription management, Walgreens invested billions buying other pharmacy chains despite the trend away from in-store shopping.
As a result, the second-largest U.S. pharmacy chain’s debt and lease obligations have ballooned to almost $30 billion.
“As a private company, WBA [Walgreens Boots Alliance] would have more flexibility to make major changes to the business, in our view, and aggressively cut costs to try to tackle recent challenges with pharmacy operating margins and declining retail product sales from increased online competition,” CFRA Research analyst Paige Meyer told FOX Business in December.
In October, the company, which has been struggling with competition from rivals like Amazon, announced plans to close at least 1,200 stores over the next three years. This move is part of its effort to shut down a “significant” number of underperforming locations across the U.S. in response to these challenges.
Sycamore Partners, a private equity firm that specializes in retail and consumer investments, has a track record of acquiring distressed retailers for profit: among them were brands such as Staples, Talbots and Nine West.
FOX Business’ Daniella Genovese and Reuters contributed to this report.