Walgreens Boots Alliance has enlisted a firm to sell its ownership in VillageMD, a clinic operator staffed by doctors that has resulted in significant financial losses for the drugstore chain.
Walgreens Boots Alliance is moving forward with the sale of its stake in VillageMD, a doctor-staffed clinic operator that has already cost the company billions.
Walgreens is collaborating with the investment banking firm Evercore and the consultancy firm Alvarez & Marsal as advisors for the sale, as reported by various news sources on Thursday. There was no comment from Walgreens when contacted on Thursday afternoon.
CEO Tim Wentworth of Walgreens has expressed the company’s intention to reduce its investment in VillageMD due to substantial losses and the need to focus on more profitable endeavors in order to revitalize the drugstore chain. In January of this year, Wentworth announced the initiation of the exit process from VillageMD.
“We are in the midst of a sale process for Village Medical, while also exploring the best options for Summit/CityMD,” stated Wentworth during Walgreens’ fiscal first quarter earnings call last month. “We are optimistic about the leadership of new (VillageMD) CEO and healthcare veteran Jim Murray. To clarify, our ultimate goal to exit remains unchanged, and we are committed to utilizing any proceeds to reduce our debt and strengthen our balance sheet.”
Walgreens invested over $6 billion in VillageMD under former CEO Roz Brewer to acquire a majority stake, but the company has significantly reduced the expansion of doctor practices and clinics connected to Walgreens. In 2020, Walgreens announced plans to establish 500 to 700 “Village Medical at Walgreens” primary care clinics led by physicians in more than 30 U.S. markets over five years, with intentions to add hundreds more thereafter.
However, a year ago, Wentworth mentioned that Walgreens and VillageMD had slowed down clinic openings partly due to difficulties in attracting enough patients to fill their “panels” allocated to specific providers.
The investment has not yielded positive results. Walgreens reported a total operating loss exceeding $13 billion for the first nine months of fiscal 2024, including a significant non-cash impairment charge related to VillageMD goodwill, resulting in a substantial charge for Walgreens last June.
Tim Barry, the CEO of VillageMD, departed the company late last year, and was succeeded by Jim Murray, the company’s Chief Operations Officer, who took on the role of interim CEO.
Considering the significant losses incurred by Walgreens from its investment in VillageMD, it remains uncertain what the drugstore chain may receive for the Chicago-based company. In January, Walgreens’ U.S. Healthcare segment, which encompasses VillageMD, the urgent care provider CityMD, Summit Health, and CareCentrix home care, reported first quarter sales growth compared to the previous year. The improved performance in U.S. healthcare helped reduce operating losses in the segment.
