March 13, 2025 | Consumer Discretionary | North America | Active
On 6-Mar-25, US pharmacy giant, Walgreens Boots Alliance (“Walgreens”), announced that it has agreed to be bought by private equity firm Sycamore Partners, as the struggling retailer looks to go private to reverse years of financial decline. Under the transaction terms, Walgreens shareholders will receive $11.45 per share in cash and a non-transferable Divested Asset Proceed Right (“DAP Right”) worth up to $3 per share, tied to the future monetisation of Walgreens’ debt and equity interests in its VillageMD subsidiary. The cash component represents a 29.4% premium, while the total consideration, including the DAP Right, implies a 63.3% premium over Walgreen’s undisturbed price on 9-Dec-24. Walgreens is currently reviewing its options for VillageMD and overseeing the monetisation process is a committee comprising of representatives from its board, including Chairman Stefano Pessina, and Sycamore. Akin to a contingent value right (“CVR”), target shareholders will receive one DAP Right per share upon deal completion. The board has approved the transaction, with two directors recusing themselves. Pessina, who will re-invest his 17% stake into the acquiring entity, and John Lederer, CEO of Staples, a Sycamore portfolio company, did not participate in discussions or voting. Sycamore has obtained a $2.5bn equity commitment letter and has secured an asset-based revolving credit facility for $5bn, a senior secured first-in-last-out term loan of $2.5bn, a receivables purchase facility for $1.0bn, and other commitment letters from a consortium of lenders, including Wells Fargo, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, UBS, Mizuho Bank, and PNC Bank. The sponsor has also entered into voting and reinvestment agreements with Pessina and his holding company. The merger agreement contains customary clauses on representations, warranties, covenants, and MAC with specific exclusions for war and pandemics. There is also a 35-day ‘go-shop’ period, ending on 10-Apr-25. Closing is contingent on shareholder approval, from the holders of a majority of outstanding shares, as well as from holders of a majority of outstanding shares excluding those affiliated with Pessina and Sycamore. A preliminary proxy will be filed within three business days after the go-shop period ends (i.e., by 15-Apr-25). The deal is also subject to regulatory clearances, including HSR, foreign antitrust and investment clearances, EU foreign subsidies regulation (FSR) approval, and under certain healthcare notification laws. HSR notification will be ...
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