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Dive Brief:

  • Walgreens Boots Alliance on Tuesday said it’s decided to hang on to its Boots U.K. drugstore operation and No7 beauty business after all.

  • The drugstore retailer received “significant interest from prospective buyers” since beginning to review its options in January, but said in a statement that, since then, market instability caused a sudden shift in financing availability.

  • The decision was also swayed by “ongoing strong performance and growth of Boots and No7 Beauty Company, which have exceeded expectations despite challenging conditions,” per the company press release.

Dive Insight:

Selling Boots would have ended an alliance forged a decade ago.

That’s when Walgreens invested some $4 billion in cash plus 83.4 million shares of its common stock for a 45% equity ownership stake in the U.K. chain. The tie-up was cemented further two years later when Walgreens grabbed the remaining 55% for about $5.3 billion in cash and 144.3 million shares.

“The combined strength, scale and expertise of Walgreens Boots Alliance creates a unique and unparalleled global leader,” soon-to-be-CEO Stefano Pessina said then.

It hasn’t really turned out that way, but now’s not the time to be selling a retail company, according to GlobalData Managing Director Neil Saunders.

Playing the waiting game may be painful for Walgreens but, ultimately, it will yield a better price,” he said in emailed comments Tuesday.

A sale could have helped Walgreens reduce its debt and reinvest in its remaining business, according to previous research from UBS analysts led by Kevin Caliendo. Otherwise, with Boots still in the fold, the company, facing a potential downgrade from credit rating agencies, may need to offload more of its other assets, they said.

The company last year sold a majority of its Alliance Healthcare businesses to AmerisourceBergen for $6.5 billion which included 2 million shares of AmerisourceBergen stock.

Meanwhile, keeping Boots may be fine with Walgreens, but it could spell trouble for Boots, according to Saunders.

“Walgreens will be reasonably comfortable keeping Boots in its portfolio for now,” he said. “However, given its past performance and its unwillingness to invest in retail, this means Boots is likely to be left treading water. That isn’t good for the chain and means it may deteriorate further until a new owner is ultimately found.



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