Walgreens to invest $5.2B in VillageMD, acquires home health benefits company

October 15, 2021 – Walgreens Boots Alliance Inc. will pay $5.2 billion to acquire a controlling stake in primary-care network VillageMD (Chicago, IL), which operates more than 200 clinics where it has acquired or hired its own physicians and medical staff. Additionally, Walgreens said it would acquire a majority stake in CareCentrix Inc. (Hartford, CT), a home health benefits manager.

Walgreens said the investment in VillageMD will enable the pharmacy chain to open doctors’ offices at 600 or more of its drugstore locations by 2025, and a further 400 by 2027.

The announcement follows last summer’s announcement where Walgreens agreed to pay $1 billion in equity and debt over the three years in exchange for a 30% stake in VillageMD.

Under the deal announced yesterday, Walgreens will up its stake in VillageMD to 63%.

Walgreens said VillageMD plans an initial public offering in 2022. It will remain a standalone company with its own board and management.

Walgreens’ acquisition of CareCentrix is also indicative of the company’s shift into the broader healthcare arena. The company says it derives 85% of its revenue from around 35 million customers who have chronic conditions such as diabetes or heart disease.

Walgreens will break out a business segment which it will call Walgreens Health, and is investing to make it cheaper and easier to fill prescriptions. Among the plans: employing a strategy called microfulfillment—increasingly popular in retail—to its pharmacy business. The model seeks to speed up the delivery of goods to consumers by supplementing sprawling, centralized distribution centers with smaller, more plentiful operations.

Walgreens has two microfulfillment centers in the Dallas and Phoenix areas serving more than 1,000 of its roughly 9,000 locations. It plans to add nine more by the end of next year, to serve 3,900 stores; and an additional 22 locations serving 8,500 stores by 2024.

The company said the centers will cut working capital costs by $1.1 billion by 2025.

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