KKR, which last month said profit slipped on costlier dealmaking, proposed buying Walgreens Boots Alliance as the private equity firm pushes deeper into healthcare. 

The potential deal, reported by Bloomberg News based on unidentified sources, would bring Alliance Boots full circle. KKR sold Alliance Boots to Walgreens in 2012 after acquiring the European pharmacy chain in 2007. KKR also began investing in healthcare growth companies out of its balance sheet in 2016 and closed on $1.45 billion at the end of 2017 for its KKR Health Care Strategic Growth Fund. 

The acquisition would be the largest leveraged buyout in history, based on Walgreens’s $56 billion market value and its $16.8 billion debt load.

Walgreens Boots has considered going private to adapt to a changing environment away from the scrutiny of public markets and to better compete with online retailers. The retailer would benefit from KKR’s strategy of focusing on health care and technology.

The transaction would require huge financing and possibly force KKR to tap other sources of capital in addition to the healthcare fund, including its flagship fund, separately-managed accounts and potentially co-investments from its limited partners. But the deal might come at the right time for the private equity giant, which recently mentioned that it has been a challenge to put money to work in the current high-valuation environment.

  • Walgreens has more than 18,750 stores in 11 countries, making it the largest retail pharmacy in the U.S. and Europe.
  • Private equity investments in healthcare rose nearly 50% globally to a record level of $63.1 billion in 2018 from $42.6 billion the previous year, according to a report by Bain & Co.
  • KKR closed a $9.9 billion acquisition of Envision Healthcare, a physician practice management group, in October 2018.