Why is Walgreens shopping its home infusion biz?

Friday, September 26, 2014

DEERFIELD, Ill. – News that Walgreens is mulling the sale of a controlling stake in its home infusion business came as no surprise to analysts.

“I think Walgreens recognizes that this is a core asset and would probably be valued quite substantially by a third party,” said Justin Ishbia, founder and managing partner of Shore Capital Partners. “There will be a lot of interest from a lot of people.”

The news of the potential sale follows CVS Caremark’s acquisition of Coram from Apria Healthcare for $2.1 billion earlier this year.

Walgreens is said to have hired Bank of America to explore a sale of just more than 50% in Walgreens Infusion Services in a deal that could be worth around $1.5 billion, according to a Reuters article.

“It’s possible they just think it could be more valuable in somebody else’s hands with them keeping a piece while also monetizing projects,” said Ishbia.

Walgreens entered the home infusion space when it acquired OptionCare for $850 million in 2007. It grew into the largest provider of home infusion when it traded its long-term care pharmacy business for OmniCare’s home infusion business in 2010.

As part of its growth strategy, Walgreens has been acquiring smaller infusion providers, something that appeared to have slowed down in recent years, say analysts.

“It’s possible that slowed because they’ve been thinking about this strategy,” said Reg Blackburn, a managing director with The Braff Group. “It’s also possible because of the lack of large acquisition targets in the market.”

One area Walgreens could possibly be considering focusing on: its specialty pharmacy business.

“The specialty pharmacy market is growing really rapidly,” said Blackburn. “Chronic disease specialty pharmacy—a lot of which is mail order—is just not the same high-touch model as the acute portion of home infusion.”