Walgreens Says Stefano Pessina Plans to Step Down as Chief Executive

(Bloomberg) -- Walgreens Boots Alliance Inc. said that Stefano Pessina plans to step down as chief executive officer, a move that comes as the drugstore giant faces the pandemic and longer-term shifts in the pharmacy business.

Pessina will assume the role of executive chairman after Walgreens appoints a new CEO, the company said in a statement. James Skinner will step down as executive chairman but plans to remain on the board to help with the leadership transition.

Walgreens shares declined as much as 3.2% in New York trading on Monday. Since the start of this year, the stock had declined 33%.

Pessina, 79, orchestrated the merger between Walgreens and Alliance Boots, the European pharmacy giant. He became CEO of the combined Walgreens Boots Alliance in 2015, shortly after completing the deal. Along with rival CVS Health Corp., Walgreens dominates the pharmacy business in the U.S., with more than 9,000 stores across the country.

Pessina owns more than 16% of the Deerfield, Illinois-based company, accounting for the bulk of his $8.5 billion fortune, according to the Bloomberg Billionaires Index.

Despite Walgreens’ mass and ubiquity, investors have been skeptical of its ability to compete in a market where insurers are squeezing pharmacies’ profits and online retailers are luring customers away from brick-and-mortar stores. The onset of the Covid-19 pandemic has only heightened those concerns.

Earlier this month, Walgreens said it would cut 4,000 jobs in the U.K. and suspend stock buybacks, citing the effects of the coronavirus pandemic on its business around the world. Traffic in its stores had fallen sharply as the virus spread, and a decline in routine and elective medical care had weighed on prescription volumes.

Decades of Deals

Over decades of deal-making, Pessina turned his family’s Italian wholesale pharmaceutical business into the largest retail pharmacy in the U.S. and Europe.

He previously ran Alliance Boots, which he acquired with KKR & Co. in 2007. The transaction came at the height of the buyout boom and underscored the difficulty of financing jumbo take-private deals, as banks struggled to find buyers for the loans to pay for the transaction.

Pessina is one of Monaco’s richest residents and has hobnobbed over the years with royalty and fellow billionaires visiting the city-state. He has received more than $1.5 billion in dividends through his career, according to Bloomberg’s wealth index.

Walgreens’ board will start a search for Pessina’s successor, the company said. It’s unclear who might take the reins. The head of Walgreens’ U.S. business, Richard Ashworth, left earlier this year to take a job as CEO of Tivity Health Inc. after nearly 30 years with the drugstore chain.

Walgreens’ decision not to immediately name a successor suggests the board is open to considering a variety of candidates, said Jefferies analyst Brian Tanquilut. The person selected will signal the strategic direction Walgreens plans to take, whether that’s deeper into retail or health care, Tanquilut said.

CVS spent $68 billion to acquire health insurer Aetna in 2018. Pessina has instead dabbled in partnerships, such as one with Laboratory Corp of America Holdings, to bring health services into stores without buying companies outright. Walgreens earlier this month said it would invest $1 billion in VillageMD to open hundreds of primary-care clinics in its drugstores over the next few years.

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