Walgreens’ Transformation Will Include Boots … For Now


After a six-month review period that saw its own stock and the broader markets falling by more than 20%, Walgreens announced Tuesday (June 28) that it has decided to retain ownership of its U.K.-based Boots unit, as well as its No7 cosmetics brand.

In a deal that had been reputed to be worth up to $7.5 Billion, had seen limited response with a combined bid from India’s Reliance Industries and U.S.-based private equity firm Apollo Global Management emerging as the only known serious offer.

In the end, Walgreens Boots Alliance CEO Rosalind Brewer said it was in the best interests of shareholders for the retailer to keep focused on furthering growth and profitability at the two businesses which she said had continued to show strong growth and performance despite challenging economic conditions.

“Since launching the process, the global financial markets have suffered unexpected and dramatic change,” the company statement said of its decision to hold rather than sell. “As a result of market instability severely impacting financing availability, no third party has been able to make an offer that adequately reflects the high potential value of Boots and No7 Beauty Company.”  

Never Say Never

The new development marks the latest twist in a 10-year tie-up of these two brands that began in 2012 and was completed on the last day of 2014.  As much as the global expansion potential and seemingly synergistic pairing of two drug store chains appears complimentary, the combination has proved challenging and significantly lagged its larger rival CVS over the past 5 years.  

Specifically, Walgreen’s $36 billion market value is roughly one-quarter the size of its primary competitor, while the $132 billion in revenue it did in 2021 was less than half of what CVS delivered last year.

In fact, in April, Walgreens was criticized and downgraded for lacking focus

“Despite a positive long-term bias, WBA is simply too complicated at present,” Robert W. Baird analyst Eric Coldwell’s note to clients in April said.

In response, Brewer told investors the company was moving ahead with plans to entirely reshape the business.

“We are transforming and aligning the core business and building a pharmacy of the future that will enable and support our health care strategy,” Brewer said on the company’s first-quarter earnings call, pointing to an expanded platform of technology-enabled healthcare solutions that would fuel its next phase of growth.

While the Boots sale has now been tabled, Walgreens did not rule out any future efforts to sell or split up the business it has worked so hard and so long to keep together.

“The Board and I remain confident that Boots and No7 Beauty Company hold strong fundamental value, and longer term, we will stay open to all opportunities to maximize shareholder value for these businesses and across our company,” Brewer said, noting that WBA was encouraged by the productive discussions held with a range of parties and significant interest it had received.

Walgreens Boots Alliance will report its third-quarter earnings results and meet with analyst this Thursday, June 30.