Walgreens buyout ‘harder to contemplate,’ says Morgan Stanley

After The Wall Street Journal reported yesterday that Walgreens Boots Alliance (WBA) is in talks to sell itself to private equity firm Sycamore Partners, Morgan Stanley analyst Erin Wright said the firm has no knowledge whether any such transaction might occur, but opined that while the firm acknowledges the context around a potential sale in a challenging pharmacy backdrop, a “buyout is harder to contemplate given its already sizeable debt burden and paltry cash flow, making the value creation pathway harder to decipher.” A hypothetical takeover premium of 20%-30% to yesterday’s closing price could imply a potential buyout of $9.2-$10B if a deal were announced, which compares to a market cap that recently stood near $9B, notes the analyst, who has an Underweight rating on Walgreens shares.