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Walgreen has been trying for financial changes for years, and now he says he has found a new way to eliminate it. But if history is a leader, it is more likely to have a final death than long -term success.
The Walgreen Bots Alliance, which owns drug shops in both the United States as well as the UK, Ireland, Mexico and Thailand, announced last week that it would end a century as a public trade company, and would be a private equity firm, a private equity firm.
Less than a decade ago, it was the chain of the largest pharmaceutical shops in the United States, and its stock Dow Jones was quite successful in changing the famous party General Electric into the industrial average, a combination of 30 companies that were selected for their importance in the economy and overall market.
But its shares have lost 83 % of its price since that day, which has been falling 71 % in the last four years. And it loses more, if it wasn’t for investors who are looking forward to sale Skimor, which has more than 7 % of the Friday business in Friday’s business.
Sikamor and Walgreen have urged both to buy the purchase company, which has already closed many of its stores, to complete the change faster.
“When we are making progress against our sophisticated change strategy, there will be time, focus and change in the creation of meaningful value that is better as a private company,” said Tim Vent. “Psychimore will provide us with the skills and experience of a partner that will record a strong track of successful retail change.”
But despite the promise, the retail cemetery is once full of bones of many– from.The dominant retailer who closed the shop after buying by private equity firms. The list includes toys RU, Sports Authority and Radio Shake – all of these leaders once in their fields. Even some companies that survived privately, such as Aeropostel, such as Aeropostel, did so only after traveling in bankruptcy court.
All the retailers taken private have not failed. Some, such as the staple of Psychmore, continue to perform well. Mark Cohen, a former head of retail studies at Columbia Business School, said, but there are many reasons for being skeptical that this is the right solution.
“It seems a good idea that a company needs to be relieved quarterly from the quarter, and instead of focusing on long -term success,” Cohen said. “But from a historical point of view, most of these deals result in the company’s drains.”
Private equity business model often relies on forcing the company to borrow largely so that the private equity firm can be the most potential withdrawal, with the long -term survival of the business not often. This loan is often used to pay “special profit” to the firm to meet the initial purchase price, as well as heavy “management fees” on the company can be paid to a private equity firm. Brick and mortar retail chains have been forced to sell the buildings that they have stores and pay rentals that they cannot afford to new owners, which gives more store closures and holidays.
When asked about the closure date of retailers after being private, neither Sichemor nor Walgreen had any comment.
As of last August, Walgreen had about 8,500 stores in the United States, and 3,700 foreign locations. It lacks about 1,000 US stores and 1,000 foreign stores from which it stands when he joined Dow in 2018. More on the coming stores are closed, as the company announced plans to close more 1,200 stores in October.
Walgreens himself was booted from Dow a year ago and replaced by Amazon, providing its growing competition with an online pharmacy. Volugrens have been approved by CVS as the country’s largest pharmaceutical store China. Volugrens and CV and rival Right Aid for both prescription drugs, damaging the pharmacy business in the back of the store, and not only from Amazon, but from large box retailers like Walmart and target, who are often selling the same things as the same.
Cohen said, whether or not to solve the problems with Sichemor Walgreen, it is likely to perform well in the deal, considering whether it is getting China in a part of its previous price and that the private equity is being deals to benefit buyers.
Cohen said, “The path to paradise is to fix the business and then make it normal and make a lot of money because you are a shareholder.”
But this is not often the way matters are over. Cohen added, “The common way is to breastfeed the business as long as you can, then break it and waste it.”
According to Cohen, the basic issues that cause private equity purchase are not far from the deal.
“What is the point of this transaction that will result in a recovery? In my opinion, nothing. Will they be able to cope basically with CVS or Amazon? No, will they be able to rationalize the behavior that will allow them to search for a toothpaste, because they will be able to lock their way, and they will be able to protect their way. Won’t walk? ” “The trap is that there are only deck chairs when moving around the Titanic.”
– CNN’s Jordan Valinsky co -operated in this report
