Walgreens Doubles Stake in VillageMD, Investing $5.2 Billion
(Bloomberg) -- Walgreens Boots Alliance Inc. agreed to invest $5.2 billion in primary-care provider VillageMD, doubling its stake in the company to 63%.
The deal will increase the number of primary-care practices located at Walgreens stores to 1,000 by 2027, with more than half located in underserved communities, the companies said in a joint statement.
Drugstores are under pressure to increase their offerings as e-commerce firms including retail giant Amazon.com Inc. make inroads into the pharmacy sphere. Walgreens is raising its profile in value-based primary care, a quickly growing segment of the health-care market worth about $1 trillion, according to the statement.
Walgreen’s adjusted earnings per share will grow about 4% over the next three years on a compound annual basis, including a flat fiscal 2022, Chief Financial Officer James Kehoe said in a presentation. The growth rate will be influenced by investments and lower vaccination rates in fiscal 2022, he said.
Walgreens also purchased a majority stake in CareCentrix Inc., a Connecticut-based provider of post-acute care and home care that serves 19 million members through over 7,400 provider locations. Walgreens invested $330 million, obtaining about 55% ownership in a company at an $800 million enterprise value.
Beyond fiscal 2024, the company sees growth of 11% to 13%, “as the faster growing and higher margin Walgreens Health achieves scale,” the company said.
Walgreens shares rose 7.4% to $50.77 Thursday in New York, the biggest gain since December. They’ve advanced 27% this year.
The company announced an investment of $1 billion in closely held VillageMD early last year, with a goal of building 600 to 700 pharmacy-located practices. The partners said in January Walgreens had accelerated its investment.
Founded in 2013, VillageMD is planning to go public, Bloomberg reported in April, citing people familiar with the matter. The initial public offering could raise as much as $1 billion and value the company at up to $10 billion, one of the people said then.
The IPO is now expected early next year, with Walgreens remaining the majority shareholder, Kehoe said on a call with investors.
Walgreens separately released quarterly results Thursday that beat analysts’ estimates. Profit for the fiscal fourth quarter was $1.17 a share, with sales of $34.3 billion, according to a statement. Wall Street had expected adjusted earnings of $1 a share and revenue of $33.1 billion, according to estimates compiled by Bloomberg.
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