March 6 (Reuters) - Walgreens Boots Alliance ( WBA )

will be taken private by Sycamore Partners for $10 billion, the

buyout firm said on Thursday, closing out nearly a century of

trading on public markets for the U.S. pharmacy giant.

Sycamore will pay $11.45 per share, a premium of 8% to the

stock's closing price of $10.60 on Thursday. Shares of the

company rose nearly 6% in extended trading.

Walgreens shareholders could also receive an additional $3

in cash from future monetization of the company's debt and

equity interests in VillageMD.

The company's market value has shrunk to just more than $9

billion from almost $100 billion a decade ago as margins on drug

prices fell and consumers shifted to cheaper rivals Amazon

and Walmart to fill their prescriptions and

purchase toiletries.

And when rivals diversified into insurance or prescription

management, Walgreens invested billions buying other pharmacy

chains despite the trend away from in-store shopping.

As a result, the second-largest U.S. pharmacy chain's debt

and lease obligations have ballooned to almost $30 billion.

"You have a business that is shrinking, and then you layer

on losses and cash burn, all of that was the perfect recipe for

what we are seeing today," said Brian Tanquilut, a healthcare

services research analyst with Jefferies bank.

Sycamore Partners, a private equity firm that specializes in

retail and consumer investments, has a track record of acquiring

distressed retailers for profit: among them were brands such as

Staples, Talbots and Nine West.

Its past approach has involved selling the companies' most

valuable assets, and reducing costs in the remaining operations

through store closures and other measures, with savings often

used to draw dividends and not necessarily aimed at growth.

"Going private makes sense on paper," said Ann Hynes, an

analyst with Mizuho Bank, adding that Walgreens' operational

challenges would likely better be handled without commitments to

shareholders.

DOWNFALL

Walgreens has been suffering from reduced cash flow and more

than half of its $7 billion in net debt is due next year.

The company is closing thousands of stores and has embarked

on a $1 billion cost-cutting program under CEO Tim Wentworth,

with some success.

It currently employs 312,000 people in 12,000 stores in

eight countries, according to its website, a sharp decline from

the 25 countries, 450,000 employees and 21,000 stores it had

four years ago.

Many of the company's missteps were under former CEO Stefano

Pessina, also its largest single shareholder, whose 2007-2014

tenure at the helm saw Walgreens' market capitalization shrink

to less than $50 billion.

In 2012, Walgreens announced a $5.2 billion investment in

primary-care provider VillageMD. That proved to be a cash drain

and is now a good exit candidate for Sycamore.

Two years later, Walgreens concluded a two-step acquisition

of Swiss-based Alliance Boots, a pharmacy-led health and beauty

group that is now considered by analysts as a likely candidate

for a spin-off.

The company stuck to its buying spree even after Pessina,

snapping up almost 2,000 stores from its former rival Rite Aid

Corp in 2018. But that store footprint proved too big and soon

after the acquisition, Walgreens started to close locations.

There were also missed opportunities. While its top rival

CVS has diversified its business beyond retail, including

acquiring U.S. health insurer Aetna for almost $70 billion in

2018, Walgreens turned away from buying insurer Humana.

(Reporting by Sabrina Valle and Abigail Somerville in New York

and Bhanvi Satija in Bengaluru; Editing by Edwina Gibbs and

Devika Syamnath)