Walgreens PE Buyout Heavily Reliant on Debt, Raising Concerns

What You Ought to Know: 

– The latest acquisition of Walgreens Boots Alliance by non-public fairness agency Sycamore Partners is drawing scrutiny as a result of excessive stage of debt financing concerned and questions surrounding Sycamore’s fairness dedication.

– In line with a Securities and Exchange Commission (SEC) filing, 83.4% of the financing for the Walgreens buyout is debt, totaling $22.5B. That is greater than double the typical debt stage (41%) utilized in non-public fairness acquisitions final 12 months.

PESP Raises Alarms About Potential Dangers

The non-profit watchdog Private Equity Stakeholder Project (PESP) has launched an announcement expressing concern concerning the leveraged buyout of Walgreens. PESP emphasizes the dangers related to non-public fairness funding in healthcare firms, citing the potential for:

• Elevated chapter threat: Leveraged buyouts usually saddle firms with substantial debt, draining sources that might be used for funding and development.
• Jeopardized affected person care: Value-cutting measures carried out to service debt can negatively influence affected person care and entry to crucial medicines.
• Job insecurity: Restructuring and potential bankruptcies can result in job losses and financial disruption in communities.

Sycamore Companions’ Historical past of Bankruptcies

PESP highlights Sycamore Companions’ historical past of bankruptcies at portfolio firms, together with Belk and 9 West. The chapter of 9 West resulted within the closure of 70 shops and mass layoffs. One other retailer, Aeropostale, claimed that onerous phrases from Sycamore Companions-owned attire sourcing firm contributed to its chapter.

Walgreens’ Workforce and Group Impression

Walgreens Boots Alliance employs roughly 312,000 staff. PESP emphasizes the significance of Walgreens’ position in offering entry to prescribed drugs and its important influence on the communities it serves. The group expresses concern that the non-public fairness buyout mannequin might negatively influence these stakeholders.