Shares of Walgreens Boots Alliance ( WBA ) rose 6% at the start of trading on Monday in a report. According to Bloomberg, KKR has approached Walgrains for a deal. KKR is one of the largest private equity firms in the world and its buyout of RJR Nabisco is described in the book Barbarians at the Gates.
Walgreens is currently valued at more than $ 55 billion. Each deal is likely to be at a premium to that price – and also includes the $ 16.8 billion debt the retail and pharmacy giant has on its balance sheet.
According to Dealogic merger research firm, the largest private takeover so far is the $ 44 billion acquisition (including debt) of Texas utility TXU from KKR ( KKR ) ] a private equity partner of TPG and Goldman Sachs ( GS ) in 2007, TXU went bankrupt in 201
4, but has since come out of Chapter 11 protection and is now part of from an energy company known as Vistra Energy ( VST ) .
Walgreens has no comment on CNN Business about Bloomberg's report or last week's Reuters report saying it wants to go private. KKR was not immediately available for comment.
Reuters announced that Walgreens is working with an investment bank Evercore Partners ( EVR ) a potential transaction. Evercore declined to comment to CNN Business about this report.
But a buyout from KKR may make sense: KKR has already made a deal with Walgreens' largest investor when it took over $ 22 billion in a private Alliance Boots drugstore chain in 2007.
then-Alliance Boots Vice President Stefano Pesina, who was the largest shareholder in Alliance Boots, on the deal. Currently, Pesina is Executive Vice President, CEO and largest shareholder of Walgreens. Pesina holds more than 16% stake in the company through its investment firm Alliance Santé Partitions.
The takeover would also help to stop bleeding in Walgreens stock price.
This year, stocks are still down nearly 10% – despite recent merger reports. This makes Walgreens the third worst performer in Dow in 2019 behind the only pharmaceutical giant Pfizer ( PFE )
and an industrial conglomerate 3M (
]) MMM ) .
Walgreens as a competitor CVS ( CVS ) , struggles because of fears that lower-cost generic drugs and the steady decline in drug reimbursement rates from state and federal health plans weigh on profits.
The company is also affected by food repression and the Drug Administration. A US regulator issued a "warning" Walgreens earlier this year to sell more cigarettes to minors than any other drugstore retailer. Walgreens, along with many other major retailers, announced plans last month to stop selling vaping products.
And Walgreens – along with CVS and Rite Aid ( RAD ) – all suffered from increased competition in pharmacies from Walmart ( () ] WMT ) and Amazon ( AMZN ) which now owns the online pharmacy PillPack. Walgreens is also squeezed into the front of its stores by similarly advantageous retailers Costco ( COST ) and Dollar General ( DG ) .
Brexit uncertainty also doesn't help Walgreens. The company said during a conference call with analysts earlier this year that sales at its Boots UK stores were weak as consumer conditions in the country "remain challenging".