Walgreens Boots Alliance Inc. shares soared after CNBC said that a take-private deal with private equity firm Sycamore Partners is still possible.
The deal for the drugstore chain appeared “mostly dead a couple of weeks ago,” CNBC’s David Faber said Tuesday. He said he was now upgrading the deal to “alive.”
Related: Walgreens sale to private equity firm is 'mostly dead': report
Walgreens shares gained as much as 15% in New York. They had risen 4% this year as of Friday’s close.
Reports emerged in December of a possible deal with Sycamore, which had earlier expressed interest in Walgreens’ international unit. Bloomberg reported at the end of last month that Sycamore had been speaking with private credit firms about debt financing for a potential deal for Walgreens, according to people familiar with the matter. Faber had said Jan. 27 that the deal was “mostly dead.”
Walgreens’ pharmacy operations are facing financial pressure from falling drug reimbursements and increased competition for retail sales from online and discount rivals. The company is also contending with liabilities from opioid-related legal actions and has considered selling some of its health clinic businesses. Walgreens has been conserving cash, suspending its quarterly dividend at the end of January, which it had paid for the past 92 years.
The potential deal would be “big and complicated, and I’m still skeptical,” said Jeff Jonas, a portfolio manager at Gabelli Funds, an investor in Walgreens. The company has a lot of debt, which makes a leveraged buyout difficult, he said.
Sycamore and Walgreens declined to comment.
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