Sycamore's $10B Lifeline Has Walgreen Investors Mooning—But There’s a Catch…

We all know that Walgreens has a fever, but apparently the only medicine that matters is a quick dose of private equity attention. In short, Walgreens had a day yesterday as Sycamore Partners is reportedly close to sealing a deal to scoop up the troubled pharmacy giant for around $10 billion, or roughly $11.30 to $11.40 per share. As expected, investors are cheering, though it’s unclear if this is genuine relief or just Stockholm syndrome setting in at this point.

(Source: Giphy) 

What’s more, is that according to the Wall Street Journal, Sycamore could finalize the transaction as early as Thursday, barring any "last-minute snag"—a phrase which basically translates to someone at Sycamore wiseing up and realizing Walgreens has more “bad decision” baggage than I did after college. 

Now, neither Walgreens nor Sycamore offered immediate comments on the “snag part”—but what we do know is that Sycamore reportedly plans to keep Walgreens’ core U.S. retail pharmacy business and sell or spin off everything else. Translation: the private-equity vultures have circled, and the Walgreens carcass is officially on the menu. Good news for shareholders though: the deal includes potential "contingent value rights," meaning investors could squeeze out a few extra pennies if Walgreens miraculously hits certain future targets. (Sooo you’re telling me there’s a chance?) 

(Source: Investopedia) 

But when you factor in the recent aura that Walgreens has been surrounded with lately, it’s no secret that Walgreens’ struggles are hardly breaking news. For instance, the company announced plans last October to shutter 1,200 "underperforming" stores over three years—which are in full effect. Meanwhile, earlier this year, Walgreens even temporarily suspended its quarterly dividend to conserve cash—because what's financial stability when you are forced to gut the dividend lifeline of beloved retirees everywhere?

Yet, while some may argue and say “BuT sHaREs aRe Up 10% tHiS YeAr”, let’s not forget that the stock has lost half of its value over the past twelve months alone. Meaning, even though Sycamore’s proposed payout of around $11.35 per share might seem generous given recent performance, the reality is that they are getting an extreme discount compared to what $WBA was trading at a few years ago. So yeah, this is less “winning the lottery” and more “getting a decent price on your totaled car” for Walgreen executives.

(Source: Giphy) 

In the end,, if this deal goes through, Walgreens will join the proud tradition of iconic American retail brands swallowed whole by private equity, chewed up, and eventually spit back out—just ask the ghosts of Sears and Toys "R" Us. But in the meantime though, shareholders get a brief moment of happiness. After all, misery loves company, especially when that company is paying in cold, hard cash. 

So yeah, do what you will with this information and place your bets accordingly, friends. It’ll definitely be interesting to see how this deal ends up playing out. As always, stay safe and stay frosty! Until next time… 

P.S. $1.4 million, $1.02 million, and $6.715 million—these aren’t lottery winnings or Miami real estate prices… they’re all insider transactions that have gone down in the last 72 hours while retail investors were busy panic-selling everything. Want to track these corporate fat cats in real-time so you can pretend you're also an executive with material nonpublic information? (Legally, of course.) Click here to join Stocks.News premium while you still can…

Stocks.News does not hold positions in companies mentioned in the article.