Walgreens is considering selling its entire majority stake in primary care provider VillageMD, a move that would be a dramatic about-face from its previous commitment to the care model.
The company is evaluating "a variety of options" in light of "VillageMD’s substantial ongoing and expected future cash requirements," Walgreens said in a Securities and Exchange Commission filing Wednesday. Options include selling all or part of its stake in VillageMD, a restructuring or other opportunities, the company said.
Related: Walgreens' plan to cut VillageMD stake brings more questions
The regulatory disclosure is the latest evidence that all parts of Walgreens' business are being closely reviewed, a point Walgreens CEO Tim Wentworth made clear when he took over in October. The consideration of selling its entire stake conflicts with a June earnings call, when Wentworth said Walgreens intended to remain "an investor and partner" in VillageMD.
Walgreens invested $5.2 billion in late 2021 to take a majority stake in VillageMD, following a $1 billion investment it made in 2020. In 2023, VillageMD expanded into multispecialty and urgent care with its $8.9 billion acquisition of Summit Health-CityMD.
VillageMD, which operates primary care clinics as Village Medical, reversed its rapid rollout of primary care clinics this year by closing more than 150 locations across several states. The closings were much greater than anticipated — in October, Walgreens said VillageMD would close just 60 locations as part of a larger $1 billion cost-cutting initiative announced just after Wentworth was named CEO.
Walgreens provided $2.25 billion in senior secured credit facilities to VillageMD in January 2023, when VillageMD closed the Summit-CityMD deal. In Wednesday's filing, Walgreens said it entered into a forbearance agreement Tuesday with VillageMD after defaults on the loan and is having discussions with stakeholders and other third parties about the company's future involvement.
Walgreens did not respond to a request for comment regarding Wednesday's filing.
A VillageMD spokesperson said Thursday strategic adjustments are common for high-growth companies and VillageMD will continue to work "in lockstep" with Walgreens to find the right path forward.
Financial analysts have previously suggested if Walgreens sells its stake, Cigna's Evernorth, already a minority investor in VillageMD, or private equity companies may be interested.
Walgreens, grappling with lower retail sales and a challenging reimbursement environment in pharmacy, reported a $5.6 billion net loss, or $6.53 per share, in the first nine months of its fiscal 2024. The company slashed its 2024 guidance in June and said it will continue closing its retail pharmacy stores.
