After $5.2B Investment In 2021, Walgreens Considers Full Sale Of VillageMD

Drugstore giant Walgreens is contemplating a full sale of its stake in VillageMD, according to the company’s most recent 8-K. 

After pouring roughly $6.2B into the business, including $5.2B in 2021 alone, and attempting to expand the network of physician’s offices, Walgreens is now “evaluating a variety of options,” per the securities filing.

“These options could include a sale of all or part of the VillageMD businesses, possible restructuring options and other strategic opportunities,” the filing reads.

Walgreens is talking to VillageMD’s stakeholders and third parties about the future of the investment, per the filing.

Walgreens’ new position stems from VillageMD’s “substantial ongoing and expected future cash requirements,” the filing says.

A full sale would be a significant change in position for the drugstore chain, which said in June that it planned to reduce its stake in VillageMD but would not exit the business entirely. However, VillageMD’s lack of profitability on a nonadjusted basis has become a problem for Walgreens, Healthcare Dive reported.

Additionally, VillageMD has defaulted on a $2.3B credit facility that Walgreens provided last year. The companies also entered a forbearance agreement Tuesday, according to the filing, meaning Walgreens will not “exercise remedies” against VillageMD.

Walgreens became the majority owner of VillageMD, a primary care clinic, in 2021, at a time when its core pharmacy business was suffering. Other drugstore chains, including CVS and Rite Aid, have also struggled in recent years amid drooping sales and high occupancy costs. 

The drugstore initially planned to operate 600 Village Medical clinics at Walgreens primary care practices next year with an expansion to around 1,000 clinics by 2027.

But it began to close the clinics last year, shuttering hundreds of locations by this year. VillageMD’s declining value was a significant factor in Walgreens’ $6B net loss in its March quarterly earnings report, per Healthcare Dive.