Walgreens shares jump 20% on talks of sale to private equity firm

Walgreens (WBA) stock jumped more than 20% on Tuesday after reports surfaced that the pharmacy giant is in talks to sell its business to private equity firm Sycamore Partners.

The deal, which could be finalized by early 2025, would pull Walgreens off the public market, offering it a potential fresh start, the Wall Street Journal first reported.

Once a dominant force in the American retail landscape, Walgreens has struggled to maintain its foothold in an increasingly competitive environment, particularly in the retail and healthcare sectors. The company’s market value soared past $100 billion in 2015 but has since plummeted to roughly $9.3 billion.

The decline has been accompanied by a steep drop in stock prices, which have fallen over 60% this year alone alone. Walgreens has faced numerous challenges in the wake of the pandemic, including a leadership overhaul and growing pressure on its pharmacy reimbursement rates. Additionally, its venture into primary care, including a reduction in its stake in VillageMD, further highlights the difficulty in gaining traction in the competitive healthcare market.

To stem its losses, Walgreens announced plans in October to close around 1,200 U.S. stores over the next three years, including 500 locations in fiscal 2025. In June, it said about 8,600 locations would be shuttered over the next few years.

With about 25% of its U.S. locations unprofitable, the company is looking to refocus on its most successful areas. A potential sale to Sycamore Partners, which owns brands like Loft and Ann Taylor, could be the major reset Walgreens needs.

In July, Moody’s (MCO) vice president of corporate finance Chedly Louis, told Quartz that closing underperforming stores could help Walgreens emerge as a smaller, more profitable player. While she noted that Walgreens may not “necessarily want to take away access,” she emphasized that poor performing locations simply aren’t worth the investment.