Walgreens Boost Alliance (WBA) - Get Report shares surged Monday amid reports that private-equity giants KKR (KKR) - Get Report has formally approached the drugstore group for what could be the biggest leveraged buyout in US corporate history.
Bloomberg reported Monday that KKR has spoken with Walgreens Boots, a Dow Jones Industrial Average component, about taking the group private. The report followed speculation of an LBO last week that would rival the record-setting 45 billion TXU Energy deal, which involved many KKR executives, as well as current Walgreens Boost CEO Stefano Pessina, in 2007. Credit Suisse analysts have suggested Walgreens Boots has an enterprise value of around $70 billion.
Walgreens shares were rising 4.67% to $62.01, a move that would take the stock's three-month gain to around 20% and value the Deerfield, Illinois-based group at nearly $53 billion.
Credit Suisse analysts have pegged a takeout price for Walgreens Boots at around $72 per share, which would give the group an enterprise value of $80 billion.
Last month, Walgreens posted stronger-than-expected fourth quarter earnings Monday while setting out near-term forecasts for profit growth and boosting its target for planned cost savings.
WBA shares have remained range-bound for the last several months as the company has been impacted by reimbursement pressure, lower generic deflation, lower brand inflation, and lower-than-anticipated benefits from its work to refresh and renew its retail offerings (primarily in the U.S.)," said lead analyst A.J. Rice.
"Further, uncertainty around Brexit and implications for WBA's U.K. and International
operations add another layer of complexity to any deal," he added.
Last month, Walgreens said adjusted earnings for the three months ending in September, the drugstore chain's fiscal fourth quarter, came in at $1.43 per share, down 3.4% from the same period last year and two cents ahead of the Street consensus forecast. Group revenues, Walgreens said, rose 1.5% to $34 billion, topping analysts' forecasts of a $33.888 billion tally.
Looking into 2019, Walgreens said it sees flat adjusted earnings growth, with a range of plus or minus 3%, and boosted the estimate from its ongoing cost savings plan by 20%, to $1.8 billion, by 2022.