Walgreens CEO Pessina to Step Down, Become Chairman -- 2nd Update
July 27 2020 - 11:57AM
Dow Jones News
By Sharon Terlep and Dave Sebastian
Walgreens Boots Alliance Inc. said Stefano Pessina will step
down as chief executive, kicking off a search for a new leader at
the company as the coronavirus pandemic has dented profits and
complicated a turnaround.
The largest U.S. drugstore chain by stores said Monday that Mr.
Pessina will remain CEO during the search for his replacement. He
will become executive chairman upon stepping down, replacing James
Skinner, who will remain on the board.
The company's shares were off nearly 2% in afternoon
trading.
Mr. Pessina, a 79-year-old Italian billionaire and one of the
drugstore chain's largest single shareholders, took over five years
ago following the merger of Walgreens and European pharmacy chain
Alliance Boots.
Walgreens and its rival CVS Health Corp. have been hit by
smaller profits from prescription drugs and competition from online
rivals that have hurt retail sales.
Walgreens this month said it was cutting about 4,000 jobs in the
U.K. and suspending stock buybacks as demand fell off in its
international business. For its quarter ended May 31, the company
said the Covid-19 pandemic sliced off $700 million to $750 million
in sales, with most of the effects tied to its global
retail-pharmacy business.
The pandemic has been challenging for drugstores, as patients
put off visiting doctors and other health providers. Walgreens has
been cutting costs in its home market and last year said it was
closing 200 stores.
Where CVS has built itself into a health-care behemoth through
acquisitions of pharmacy benefit manager Caremark in 2006 and
insurer Aetna Inc. in 2018, Mr. Pessina in recent years has
championed a strategy of partnerships over deals. Walgreens teamed
up with companies from insurer Humana Inc. to grocer Kroger Co. in
the past couple of years. In June, the company announced a deal
with primary-care provider VillageMD to attach physician offices to
hundreds of U.S. drugstores. Walgreens shifted away from all-out
acquisitions came after unsuccessful attempts to buy Humana and
rival Rite Aid Corp.
Walgreens's efforts have yet to deliver higher revenue and
profits, and Mr. Pessina has urged Wall Street to be patient.
Walgreen shares are down nearly 30% in the past year while CVS
shares rose 14% in the same period.
Mr. Pessina has a degree in nuclear engineering and worked for
several years in academia before taking over his family
drug-distribution business. He has claimed to have completed more
than 150 acquisitions as he consolidated the business around
Europe.
One of those acquisitions was a company headed by Ornella Barra,
who has been Mr. Pessina's life partner for the last three decades.
Today she is Walgreens's co-chief operating officer.
In 2006, he merged his business, then known as Alliance UniChem,
with the Boots drugstore chain. A year later, he teamed with KKR
& Co. to buy out the company and take it private for $18.5
billion. The deal making continued, and in 2012 Alliance Boots
agreed to sell a 45% stake to Walgreen for $6.7 billion. Last year,
Walgreen bought the rest of Alliance Boots for around $14.7
billion.
Mr. Pessina became the company's executive vice chairman in
January 2015, a month after the Alliance Boots deal, and
subsequently served as interim CEO before being confirmed in the
role in June 2015. Mr. Skinner has been executive chairman since
January 2015.
Write to Sharon Terlep at sharon.terlep@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
July 27, 2020 12:42 ET (16:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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