Walgreens Sycamore Buyout Deal ‘Alive’ After Having Been Pronounced Mostly Dead: Stock Prices Jump

Embattled pharmacy chain Walgreens may see its immediate future brighten a bit after news emerged that a buyout deal previously declared “mostly dead,” as CNBC reported, is now said to be “alive” once more.

According to The Wall Street Journal, this latest news represents a bit of hope for investors backing Walgreens as the company has seen its fortunes decline in recent years. Over the course of the past five years, its stock has nosedived in value by about 80%, and its market cap has tumbled to rest just under $10 billion after having stood at over $100 billion a decade ago.

Walgreens and Sycamore Deal Announced in December Showing New Signs of Life

In December, Walgreens stock ticked upward upon news that private equity group Sycamore Partners was eying a buyout, with the eventual aim of taking the company private. After CNBC’s David Faber proclaimed, on the air, that the deal was “mostly dead” in January, the stock shed a great deal of value, as the WSJ outlined.

On Feb. 18, however, Faber issued news of a course correction, suggesting the wheels were once again in motion concerning the Walgreens buyout by Sycamore.

The stock surged 12% on the Tuesday news but had lost at least some of that momentum by midday Feb. 19, down 1.9% as of 1:13 p.m. ET to rest at a value of $10.85.

No matter who the buyer might end up being, Walgreens remains heavily indebted and continues burning cash, as WSJ’s David Wainer pointed out.

“That means that any buyer would need to take on the company’s substantial liabilities,” he added.

CEO Tim Wentworth, who took over the helm of the company in October 2023, has been hard at work executing a company turnaround. During his tenure, Walgreens has announced the closure of hundreds of stores nationwide, scaled back its investment in VillageMD, and suspended its quarterly dividend as a drastic cost-cutting measure.

Despite all this, Wainer stated, Walgreens still has a hard road ahead. On the upside, according to Leerink Partners analyst Michael Cherny, the talk of a Sycamore buyout has created something of a price floor for Walgreens shares — as long as news of another reversal doesn’t make headlines in the near term.