Unpacking the $12 Billion Debt Deal: What Walgreens Boots Alliances Potential Take-Private Means for Investors

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The world of high finance is abuzz with the news of Walgreens Boots Alliance Inc.'s potential take-private deal with Sycamore Partners. As bankers scramble to secure $12 billion in funding, investors are left wondering what this means for the future of the company. To understand the intricacies of this deal, let's break down the key components.

Firstly, the financing package is expected to be a combination of leveraged loans and high-yield bonds, with banks tapping into the dollar, euro, and sterling-denominated markets. This is a common approach for large-scale deals, but what's interesting is the potential inclusion of an asset-based lending component. This would involve using assets such as inventory as collateral, which is a rare but not unprecedented move.

Another unusual element under discussion is the potential addition of a slice of private credit to a syndicated debt deal. This approach has been used in other recent deals, such as the $5 billion refinancing of Ardonagh Group, and could provide an additional layer of flexibility for the company.

However, one of the major challenges facing bankers is calculating the company's overall earnings before interest, taxes, depreciation, and amortization (Ebitda). With a diverse range of units, including Walgreens, Boots, and VillageMD, determining a accurate Ebitda figure is crucial for determining the amount of leverage to put on the business.

So, what does this deal mean for investors? On the one hand, a take-private deal could provide Walgreens Boots Alliance with the opportunity to restructure and refocus its business, potentially leading to increased efficiency and profitability. On the other hand, the significant amount of debt involved in the deal could pose a risk to the company's financial stability, particularly if the retail pharmacy industry continues to face challenges.

As expert analyst, Stefano Pessina, Chairman of Walgreens Boots Alliance, notes, "A take-private deal would mark the culmination of our efforts to save the drugstore empire." With a proven track record of deal-making, Pessina is well-positioned to navigate the complexities of this transaction.

In conclusion, the potential take-private deal of Walgreens Boots Alliance is a complex and multifaceted transaction that requires careful consideration of various factors. As investors, it's essential to stay informed and up-to-date on the latest developments, and to carefully weigh the potential risks and opportunities involved. With the right financing package and strategic vision, this deal could be a game-changer for the company, but only time will tell if it will ultimately succeed.