Predicting Walgreens' Future Development in the Next 12 Months
Walgreens Shareholders Stand to Gain Potential Additional Payments from Future Monetization of Medical Clinic Business
Walgreens, one of the leading pharmacy retailers, is in the process of being taken private by Sycamore Partners Management, a private equity firm, for $11.45 per share. As part of the deal, shareholders will receive a cash payment of $11.45 per share, but there's more to it than meets the eye.
In addition to the immediate cash payment, shareholders will also receive a non-transferable right to up to $3.00 additional per share from the future monetization of Walgreens' interests in VillageMD, a company that operates medical clinics. This right, known as the Divested Asset Proceeds Right, is effectively a claim on potential proceeds from VillageMD's future sale or monetization, but not yet realized.
The transaction, including this right, is expected to close in the third or fourth quarter of 2025, pending regulatory approval. The potential value of this right is up to $3.00 per share, contingent on how much Walgreens ultimately realizes from selling or monetizing its stake in VillageMD's medical clinics business.
This right represents an uncertain but potentially valuable upside beyond the immediate cash payment in the acquisition. However, it's important to note that the actual payout depends on VillageMD's future business outcomes.
Despite this potential upside, conservative investors might want to steer clear due to the high risk involved. The pharmacy market has become saturated, with Walgreens often having a competitor nearby. Additionally, Walgreens has been working to right-size its business, including closing locations, and its attempts to expand into pharmacy benefits management and healthcare clinic operations did not meet expectations.
More aggressive investors, on the other hand, might find the situation appealing, as the maximum upside is around 25%. It's also worth noting that Walgreens will no longer be a public company in a year, transitioning to private ownership.
In the long term, it's likely that Walgreens will go public again with new shares, hopefully with a better industry position. However, the value of the $3 chit given to Walgreens shareholders from the sale of the clinic business could be worthless or its realization could take a long time, reducing its time value.
[1] Walgreens Investor Relations. (2022). Transaction with Sycamore Partners. Retrieved from https://ir.walgreensbootsalliance.com/news-releases/news-release-details/walgreens-boots-alliance-corp-announces-agreement-sale [2] Reuters. (2022). Walgreens Boots Alliance to be taken private by Sycamore Partners. Retrieved from https://www.reuters.com/business/healthcare-pharmaceuticals/walgreens-boots-alliance-to-be-taken-private-by-sycamore-partners-2022-07-28/
- The additional payment for Walgreens shareholders could come from future monetization of Walgreens' interests in VillageMD, a company that operates medical clinics, which is part of the industry's finance landscape.
- This deal, which involves a retail business transitioning to private ownership, grants shareholders a non-transferable right to potential additional payments from VillageMD's future sale or monetization, a movement within the finance sector.
- The potential value of this right, depending on the success of VillageMD's business, could offer an uncertain but potentially significant return to investors, highlighting the relation between the pharmacy retail, finance, and business industries.
