*

Company sold for 10% of what it was worth a decade ago

*

Walgreens doubled down on pharmacies as the industry

shrank

*

Chain will be run by private equity firm, stock to be

delisted

(Adds context, CEO comment, VillageMD price in paragraphs 6-7,

12-18)

By Sabrina Valle and Abigail Summerville

NEW YORK, March 6 (Reuters) - Walgreens Boots Alliance ( WBA )

will be taken private by Sycamore Partners for $10

billion, the firms said on Thursday, closing out nearly a

century of trading on public markets for the U.S. pharmacy

giant.

The price is a fraction of the $100 billion the

second-largest U.S. pharmacy chain was worth a decade ago. Its

fortunes collapsed as drug margins fell and as consumers turned

to cheaper rivals such as Amazon ( AMZN ) and Walmart ( WMT ) to

fill their prescriptions and purchase toiletries.

And when rivals diversified into insurance or

prescription management, Walgreens invested billions of dollars

in buying other pharmacy chains such as European giant Alliance

Boots despite the trend away from in-store shopping.

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

Walgreens' 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 primary-care provider VillageMD.

The company's market capitalization has dropped 90% since

2015 to $9.3 billion on Thursday, with debt and lease

obligations ballooning to almost $30 billion.

The final acquisition price was calculated by Sycamore

considering the worst-case scenario, based on the minimum price

it could recover if assets had to be split for a sale or to be

run separately, a person close to the discussions said.

"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 at Jefferies.

Sycamore, a private equity firm that specializes in retail

and consumer investments, has a track record of acquiring

distressed retailers for profit including 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.

Walgreens Boots Alliance ( WBA ) CEO Tim Wentworth said in a

statement that the company was making progress on its turnaround

strategy, but meaningful value creation would take "time, focus

and change that is better managed as a private company".

Walgreens has been trying to sell some of its assets or the

company as a whole for at least six years.

In 2019, private equity firm KKR offered $70 billion for the

retailer in private talks that did not advance, according to a

Morgan Stanley report.

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 tenure at

the helm saw Walgreens' market capitalization shrink by about

half to less than $50 billion when he exited in 2021.

In 2021, Walgreens announced it took a majority interest in

VillageMD for $5.2 billion, following its initial stake

acquisition in 2019. 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, 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 reportedly considered buying insurer Humana

but eventually dropped the idea.