Why Walgreens Boots Alliance Rose Even on a Bad Day for the Markets

Shares of Walgreens Boots Alliance (NASDAQ: WBA) rose on Thursday, up as much as 7.3% before settling into a 2.2% gain by 3:30 p.m. ET. That gain was still notable, since the broader markets were down significantly on the day.

News reports circulated with further details on a potential buyout of the company by private equity firm Sycamore Partners, which has been in talks to buy the troubled pharmacy since late 2024.

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A potential three-way split

According to people familiar with the matter and reported in the Financial Times, Sycamore Partners is proposing to split Walgreens into three separate companies: the main Walgreens pharmacy in the U.S., the Boots pharmacy and chemist in the U.K., and specialty pharmaceutical unit Shields Health Solutions. Moreover, the sources said Sycamore appeared to have the necessary financing lined up.

Walgreens had spiked on rumors of a buyout in December, but shares have since retreated back to where they were prior to that news due to a lack of follow-through, compounded by recent market volatility. Usually, buyouts are made at a decent premium to the existing price of a stock, so the new details on Sycamore's plans today appear to have sparked a near-term rally.

Don't buy just for a buyout

It should also be noted the Financial Times piece said that talks could still fall apart, and it's usually not a great strategy to bet on a buyout that hasn't yet been announced. Therefore, interested investors should only get involved if one believes Walgreens' earnings declines may be stabilizing, and if you believe in the turnaround plan in progress under new CEO Tim Wentworth, who took over in late 2023.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.