Continuing in its efforts to transition into a health care destination for consumers, Walgreens Boots Alliance Inc. (WBA, Financial) announced on Thursday it is becoming the majority owner of VillageMD, increasing its ownership stake to 63%.
The Deerfield, Illinois-based drugstore chain, which will have opened more than 80 Village Medical clinics within its existing stores by the end of this year, will invest another $5.2 billion in the primary care company. Despite the investment, VilliageMD, which is headquartered in Chicago, will remain an independent company with its own management and board. It also plans to conduct an initial public offering in 2022.
Following in the footsteps of competitor CVS Health Corp. (CVS, Financial), Walgreens’ focus has shifted to becoming a health care destination that not only fills prescriptions, but also has doctors available to write them and offer other types of primary and preventative care. With the goal of providing consumers more access to health care, especially in rural and underserved communities, the company’s plan is to open at least 600 clinics within its stores in more than 30 U.S. markets by 2025 and 1,000 locations by 2027.
In a statement, Walgreens CEO Roz Brewer commented on the initiative, noting that VillageMD has “high rates of patient satisfaction and a talented management team who share our strategic vision.”
“The best health care is deeply rooted in local communities, and Walgreens is committed to expanding convenient access to high-quality and affordable health care services to our patients and customers in our neighborhood locations,” she said.
Walgreens also reported better-than-expected fourth-quarter 2021 results on Thursday morning, posting earnings of $1.17 per share on $34.26 billion in revenue as it saw a surge in demand for Covid-19 vaccines, tests and over-the-counter medications. Refinitiv’s analysts were projecting earnings of $1.02 on $33.3 billion in sales.
VillageMD, which currently operates over 230 practices across 15 markets, has seen rapid growth since its founding in 2013. The company noted revenue has increased from $217 million in 2017 to an expected $1.3 billion in 2021.
Having formed a partnership in 2019, Tim Barry, the CEO and chairman of VillageMD, said the two companies have worked together “to create an integrated primary care and pharmacy model” that accomplishes their primary goal of better patient care.
“WBA’s investment supports our ongoing commitment to providing the highest quality health care to all patients, including many people who don’t currently have convenient access to a primary care provider,” he said. “This expanded partnership helps us accelerate our mission to deliver the best health care in the world.”
Pending approval, the deal is anticipated to close by the end of this year.
Following the announcement, shares of Walgreens were up nearly 5% on Thursday morning at $49.61. GuruFocus estimates the stock has climbed 24.41% year to date.
Of the gurus invested in Walgreens as of the end of the second quarter, Pioneer Investments had the largest stake with 0.36% of its outstanding shares. Larry Robbins (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), John Rogers (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also had significant positions in the stock.
According to GuruFocus’ Industry Overview, Walgreens is the third-largest company by market cap in the health care providers and services industry, behind HCA Healthcare Inc. (HCA, Financial) and Veeva Systems Inc. (VEEV, Financial).
