Walgreens Boots Alliance Inc. (NASDAQ:WBA) retreated 3.26% to $10.08 in Wednesday's pre-market trading, following Tuesday's 20% surge, as prominent market voices weighed in on the potential private takeover by Sycamore Partners.
What Happened: Gary Black, Managing Partner at The Future Fund LLC, outlined a detailed valuation case for a possible $15 per share offer.
Walgreens management guided for the fiscal year 2025, expecting adjusted earnings per share to range between $1.40 and $1.80 during their most recent earnings call. At the current stock price of $10.70, this places WBA's price-to-earnings ratio at 6.7 times the fiscal year 2025 EPS, Black wrote on X, noting that the stock currently offers a 9.3% dividend yield.
— Gary Black (@garyblack00) December 10, 2024
$WBA +20% to $10.70 on reports that private equity firm Sycamore Partners is in talks to take Walgreens private. My back-of-the-envelope math suggests a $15/share ($13B total) bid could be on the table, which assumes a paltry 6x EV/EBITDA deal price (equates to 16.6% pretax cash...
CNBC's Jim Cramer struck a more cautious tone, warning investors about the deal's complexity. "Wow, Walgreen's too tough to turn even for the great Wentworth whom I revere. Don't overpay for this one..." Cramer posted on X.
Wow, Walgreen's too tough to turn even for the great Wentworth whom i revere. Don't overpay for this one...
— Jim Cramer (@jimcramer) December 10, 2024
What Happened: The commentary comes amid Walgreens' stark decline from its December 2015 peak of $85 per share, when it commanded a $100 billion market value. The pharmacy chain, now valued at roughly $9 billion, has lost 82% of its value since 2020 as it faces growing competition from online pharmacies and Amazon.com Inc.
The Wall Street Journal reported that Sycamore Partners, which previously acquired Staples for $7 billion in 2017, might seek partners or divest certain assets if a deal materializes. This approach differs from KKR's failed 2019 bid of approximately $70 billion, which Walgreens' board rejected as insufficient.
Walgreens' recent struggles are evident in its latest quarterly results, where adjusted earnings dropped 41% despite revenue growth, leading to plans for closing 1,200 stores over three years.
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