Dive Brief:

• Walgreens is divesting additional shares in the drug distribution company Cencora as part of its strategy to generate cash amidst ongoing financial difficulties.
• The most recent sale yielded approximately $300 million for Walgreens, reducing its ownership stake in Cencora from 10% to about 6%, as indicated in a press release issued on Thursday.
• Walgreens has stated that it intends to allocate the proceeds from this sale toward debt repayment and reinvestment in various corporate functions, emphasizing that this transaction will not affect its existing partnership with Cencora.

Dive Insight:

Walgreens has had a collaborative relationship with Cencora, formerly known as AmerisourceBergen, since 2013. The pharmacy chain has been actively reducing its stake in Cencora to secure funding for upcoming debt obligations and to enhance its operational stability following challenges in transitioning to a health services model.

In the previous summer, Walgreens executed a significant sale of approximately $1.1 billion in Cencora shares. This followed earlier transactions in 2023 amounting to nearly $1.9 billion and $674 million, along with further divestitures in 2024 totaling $992 million and $400 million.

In the deal announced on Thursday, Cencora is set to repurchase roughly $50 million worth of its stock from Walgreens, while Walgreens will sell an additional $265 million worth of shares. Furthermore, Walgreens incurred a $20 million expense to settle stock transactions early, resulting in total net proceeds of $295 million from this transaction.

In addition to its dealings with Cencora, Walgreens has been undertaking other cost-cutting measures. This includes laying off employees and planning the closure of more than 1,000 underperforming stores, including locations of VillageMD, the primary care chain in which it holds a majority stake.

The declining value of VillageMD has significantly contributed to Walgreens’ recent financial losses. The company is reportedly considering divesting its entire stake in VillageMD as part of its broader strategic realignment.

Despite facing substantial challenges, Walgreens’ most recent quarterly results suggest some progress in its turnaround efforts, although they still reflect a considerable net loss. Reports indicate that the company has been exploring the possibility of a private equity buyout. However, recent legal complications, including a lawsuit from the Department of Justice regarding Walgreens’ involvement in the U.S. opioid crisis, may have complicated these discussions, according to analysts.