Walgreens Boots Alliance said it was considering selling its full stake in the VillageMD business as the retailer seeks to turn its core pharmacy operations around.
In a filing with the Securities and Exchange Commission on Wednesday, Walgreens said it was evaluating a variety of options for VillageMD, including the sale of part or all of the business, a potential restructuring, and other strategic options. The filing cited “substantial ongoing and expected future cash requirements” for VillageMD, which operates primary-care clinics in markets around the country.
The announcement of a potential sale of the VillageMD business comes a few days after VillageMD defaulted on the terms of a $2.25 billion credit facility that Walgreens had provided for VillageMD, according to the SEC filing. Walgreens said it has since entered into a forbearance agreement with VillageMD in which it will not seek penalties, subject to the clinic operator’s compliance with certain conditions.
In the filing, Walgreens said it is “actively engaged in discussions with VillageMD’s stakeholders and other third parties with respect to the future of its investment in VillageMD.”
A spokesperson for Walgreens could not be reached for comment.
In June, Walgreens said it planned to reduce its stake in the clinic operator as part of a broad restructuring of its operations, calling for the closure of up to 25% of its traditional drugstore locations. Earlier this year, Walgreens took a $5.8 billion after-tax charge for impairment related to its VillageMD investment and said it would close 160 VillageMD clinics in markets nationwide.
Walgreens first began partnering with VillageMD in 2019, and in 2020 acquired a 30% stake in the clinic operator for $1 billion as part of a plan to expand its primary-care offerings by placing physician-staffed VillageMD clinics inside its drugstores. Then, in 2021, Walgreens invested $5.2 billion in VillageMD to increase its stake to 63%, and it said at that time that it hoped to have 600 primary-care clinics in more than 30 markets by 2025 and 1,000 by 2027.
VillageMD currently has 680 clinics in 26 markets, including about 200 that are co-located with Walgreens, according to reports.