Walgreens Continues to Divest Cencora Shares, Shrinking Stake to 6%

Walgreens Boots Alliance, the global pharmacy chain, has announced another significant sale of its shares in drug distributor Cencora, formerly known as AmerisourceBergen. This latest move is part of Walgreens' ongoing strategy to generate cash and streamline its operations amidst financial challenges and a shift in business focus.

Sale Details and Financial Impact

The most recent transaction, announced on Thursday, netted Walgreens approximately $300 million and reduced its stake in Cencora from 10% to about 6%. The deal comprised two main components:

1. Cencora repurchased approximately $50 million worth of its own stock from Walgreens.
2. Walgreens sold an additional $265 million worth of Cencora shares on the open market.

Additionally, Walgreens paid $20 million to settle stock transactions early, bringing the total net proceeds to $295 million. The pharmacy giant plans to use these funds to pay down debt and invest in other corporate functions.

Historical Context and Ongoing Divestment Strategy

This sale is the latest in a series of divestments that Walgreens has executed over the past few years. The company's relationship with Cencora dates back to 2013, but recent financial pressures have led Walgreens to gradually reduce its ownership stake. Previous sales include:

• Summer 2024: $1.1 billion in Cencora shares sold
• 2024: Two separate sales of $992 million and $400 million
• 2023: Sales of $1.9 billion and $674 million

These transactions highlight Walgreens' urgent need for cash to meet upcoming debt obligations and improve its operational health, particularly following an unsuccessful pivot to health services.

Broader Strategic Shifts and Challenges

Walgreens' divestment of Cencora shares is part of a larger restructuring effort aimed at stabilizing the company's financial position. Other strategic moves include:

• Laying off employees to reduce operational costs
• Announcing plans to close up to 1,000 underperforming stores, including locations of VillageMD, a primary care chain majority-owned by Walgreens
• Considering the eventual sale of its full stake in VillageMD, which has seen a significant decline in value

Despite these efforts, Walgreens continues to face challenges. The company's most recent quarterly results showed some progress towards a turnaround, but still reported a steep net loss. Additionally, a recent lawsuit from the Department of Justice regarding Walgreens' role in the U.S. opioid crisis has potentially complicated any discussions about a private equity buyout that were reportedly being considered.

As Walgreens continues to navigate these challenges, the pharmaceutical industry watches closely to see how this major player's strategic shifts will impact the broader healthcare landscape.