Walgreens Boots Alliance Inc. has been reviewing a potential deal to take the company private in what could become the largest leveraged buyout in history, people familiar with the matter said.
The company has recently held informal talks with private equity firms including KKR & Co., the people said, asking not to be identified because the information is private. Walgreens Boots Chief Executive Stefano Pessina is the company’s largest shareholder, with a stake of about 16%, according to data compiled by Bloomberg.
Deerfield, Ill.-based Walgreens Boots has a market value of about $55 billion and $16.8 billion of debt. At that size, a deal to take the company private would be bigger than the largest leveraged buyout in history: the 2007 sale of utility TXU Corp. to KKR & Co. and TPG, which was worth about $45 billion including debt, according to data compiled by Bloomberg.
Some of the buyout firms have shown reluctance to participate in a deal, the people said. It’s unclear how feasible the transaction would be, and the company could decide against pursuing the idea, the people said.
Representatives for Walgreens Boots and KKR declined to comment.
Walgreens Boots shares rose 2.6% on Tuesday to $61.21. Its bonds dropped.
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.
The company is under immense pressure from online competitors including Amazon.com Inc., which have chipped away at front-of-store sales of household and beauty items. While top rival CVS Health Corp. has grown into a vertically integrated healthcare giant, Walgreens Boots has doubled down on retail, announcing pilot partnerships with retailers such as grocer Kroger Co.
It has also announced an ambitious $1.8 billion in annual cost cuts and plans to shut its in-store health clinics.
This wouldn’t be Pessina’s first ambitious private equity deal.
The Italy native previously ran Swiss health and beauty retailer Alliance Boots, which he had acquired with KKR in 2007. The transaction came at the height of the buyout boom and underscored the challenges of financing jumbo take-private deals, as banks struggled at the time to find buyers for the loans to pay for it.
Pessina, 78, took his current role after Walgreen Co. in 2014 acquired the part of Alliance Boots that it didn’t already own for about $15.3 billion.
Walgreens Boots is the largest retail pharmacy in the United States 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 centers that deliver to more than 240,000 pharmacies, doctors, health centers and hospitals annually. It operates Walgreens and Duane Reade stores in the United States and Boots stores in Europe and Asia.
The company had sought to buy rival Rite Aid Corp. But in 2017, the companies scrapped the merger amid regulatory concerns that the combination would hurt competition in the U.S. drugstore market. Walgreens Boots instead bought roughly 2,000 stores from Rite Aid.
Hammond, Porter, Ahmed and Nair write for Bloomberg.