JPMorgan puts a number to a Walgreens buyout

JPMorgan crunches the numbers on what a leveraged buyout of Walgreen Boots Alliance (WBA +0.5%) would look like.

“We believe a potential deal could be valued at up to ~$75 per WBA share, based on our assumptions around maximum lease-adjusted leverage and minimum IRR to private equity owners. We assume a maximum lease-adjusted leverage ratio immediately post the deal close of 6.5x (what the company could potentially support based on our discussions with our JPM credit counterparts). Further, we also assume private equity owners would require a minimum IRR of 15% over a five-year period. We also assume an exit multiple of 10.0x forward EBITDA after five years. Using those parameters, we believe that could imply a maximum transaction value of ~$85 billion, which would imply an equity value of ~$74.97 per share (or a ~20% premium to yesterday’s closing price).”

The firm sees some uncertainties that could impact a potential Walgreens deal – including exposure to opioid settlements, Brexit and the political/regulatory environment in the U.S. It’s also unclear if private equity could raise the ~$22B needed based off the JP analysis.

https://seekingalpha.com/news/3518201-jpmorgan-puts-number-walgreens-buyout