Advertise with fastmoving.co.za
 
 

Sefano Passina.
Sefano Passina.

Walgreens' Sefano Passina's $70bn global ambition

INTERNATIONAL NEWS

By Andrea Felsted - Nov 11th, 10:07

Any deal would be impossible without the backing of the Italian billionaire who owns 16% of the group and has China in his sights. 

combined group private — with KKR — in a $16bn deal, Europe’s biggest buyout at the time.

Acquiring Walgreens would dwarf Alliance Boots. It would probably need several financial sponsors and substantial debt funding. Walgreen’s leverage is already fairly high. Net debt will be about 1.8 times earnings before interest, taxes, depreciation, and amortisation (ebitda) at the end of the current financial year, according to Bloomberg analyst estimates.

The retail business generates cash. Even so, this might not be the best time to gear up. The Alliance Boots buyout saddled the group with about $12bn of debt, just as the global economy was hit by the financial crisis. With concerns about a US recession escalating, there’s a risk of history repeating itself.

What’s more, the retail landscape has shifted dramatically over the past decade. Amazon is a much more muscular force than it was in 2007 and seems to be targeting the pharmaceutical business. Meanwhile, Walgreens faces other rivals such as Ulta Beauty in the US and AS Watson Group, which owns Britain’s Superdrug.

To keep up, the privately-owned company would need to invest, as well as service its debt.

Walgreens also has a huge number of stores, which may need to be pruned. While it might be easier to close shops away from the glare of the public markets, terminating leases is expensive.

Pessina — and, more importantly, any private equity backers — will need an exit eventually should the buyout succeed. Last time he was able to persuade Walgreens to purchase Alliance Boots. There’s no such obvious contender now. The group could re-list on the public market, but potential holders would have to be convinced that the investment case was different this time around.

After conquering the US, Pessina has long had China in his sights and has already made several investments there. It’s possible that he wants to tie up with an Asian operator to create his ultimate goal: a truly global pharmaceutical distribution and retail group. Given the trade tensions between the US and China that might not be so easy right now. But things might look better after five years — a typical private equity holding period.

At 78, some other executives are heading for the beach, but Pessina has shown no signs of slowing down. In fact, another mega-buyout may just be the next step in his global ambitions.
Business Live 

Related News

Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.

Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.