Cartoonist Rube Goldberg designed fantastical machines to complete simple tasks through tortuously convoluted mechanisms. Buyout shop Sycamore Partners might take his contraptions as a model, judging by a Wall Street Journal report that it’s in talks to acquire Walgreens Boots Alliance. The struggling $8 bln drugstore is buried under a $36 billion morass of debt, leases and legal costs. Yet a carefully orchestrated clean-up might extract a salvageable asset. The idea is straightforward enough. Set aside the complications and focus on Walgreens’ net debt of $6.4 billion. On that basis, before deal news broke on Tuesday, it traded at under 4 times

Between a still-choppy market for stock-market listings and a dealmaking slump, buyout shops have few easy options to offload their investments. Waystar, whose backers include Canada Pension Plan Investment Board and EQT, is trying its luck with the initial public offering route. Last valued at $2.7 billion, the healthcare payments company is now eyeing a debut at nearly three times that figure, according to Reuters. With its deal-heavy growth strategy crimped by high interest rates, it’s likely the company’s best option, but the valuation looks aggressive. Waystar provides software to handle billing and payments for healthcare providers, some three-fourths of whom still manage those functions in-house,

Carl Icahn has correctly diagnosed what ails Illumina, but he is prescribing an overly aggressive treatment. The pushy billionaire wants three board seats at the biotechnology company, after it overpaid for Grail and took on too much regulatory risk. Such aggression invites oversight, but a 1.4% stake only buys so much. Illumina makes genetic sequencing machines used in medical research and discovered by accident that it could detect cancer by finding tumor fragments in blood. Boss Francis deSouza spun off that business in 2016. He later changed his mind, agreeing to buy it back for $7 billion. The $3.9 billion

Johnson & Johnson is betting that devices designed to keep patients’ hearts pumping will do something similar to its revenue growth. The U.S. healthcare firm is paying $16.6 billion to buy cardiac-device maker Abiomed, a transaction that will create a measly return in the near term, but will help boost J&J’s top-line appeal after an impending breakup. The price, at $380 a share, is hefty. It works out at roughly 50% above where Abiomed’s stock was trading at Monday’s close, and that’s not including an extra payout due if the company hits certain financial and regulatory milestones. With Abiomed set to make

Merck is in some ways a victim of its own success. Its cancer treatment, Keytruda, represents a growing percentage and already over a third of revenue at the $185 billion pharmaceutical company. The drug giant is in talks to acquire Acceleron Pharma, with a market capitalization of around $11 billion, according to the Wall Street Journal. That would help Merck diversify with two possible blockbusters. But both drugs are already spoken for in part by rival Bristol Myers Squibb. That raises the risk of side effects for any Merck deal. Acceleron has one drug approved for anemia. It’s growing rapidly,

There are good reasons to be skeptical that Biogen’s Aduhelm, the first new treatment for Alzheimer’s disease in nearly two decades, will change patients’ lives for the better. Investors are far too pessimistic, however, on how good this drug might be for the $48 billion biotechnology firm. Since the U.S. Food and Drug Administration approved Aduhelm in June, Biogen has added a net $5 billion to its market capitalization. A good rule of thumb in biotech is that a drug is worth perhaps five times its peak sales. Biogen has to share eventual profit with partner Eisai too. But the

SPACs, biotechnology and deals where insiders buy out minority investors are all at the more complex end of company finance. Roivant Sciences has found a way to combine all three. It plans to raise funds by merging with a listed special-purpose acquisition company and then may buy out minority investors in Immunovant, a drugmaker it floated two years ago via a sale to another blank-check vehicle. At heart, what Roivant is doing is fairly simple – and risky for investors who join it for the ride. Roivant has about 58% of Immunovant, which at $1.5 billion is worth two-thirds less

What looks expensive today might not appear so dear tomorrow. That’s certainly what Thermo Fisher Scientific is betting with its $17.4 billion acquisition of PPD, which runs clinical trials. The price of the deal, which was announced on Thursday, doesn’t look promising for the buyer over the short run. Thermo Fisher, the world’s largest maker of scientific instruments, thinks it can find $125 million of cost and revenue synergies. The value of these, taxed at the statutory rate and put on a multiple of 10, is nearly $1 billion. That’s about a third of the premium it’s paying. The return

Royalty Pharma deserves its pharmacy discount card. The private equity specialist, which buys up revenue streams on potential blockbuster drugs, persuaded investors to value it at $16.7 billion, making its initial public offering priced on Monday the biggest on a U.S. stock exchange this year. The firm led by Pablo Legorreta has ballooned in size, as it has largely operated in a buyers’ market with limited competition. Yet concentration and rising political risk warrant a big discount to more diversified peers like Blackstone. As with all good private equity stories, Royalty Pharma’s revolves around buying assets with leverage from sellers

Moderna is putting stock-sale opportunism to the test. The biotech developing a potential Covid-19 vaccine this week joined a rapidly growing list of companies selling more shares to investors. It makes sense, given the market rebound and some issuers’ need for cash. But the rush to sell by more speculative companies like Moderna should give buyers pause. The pandemic has had a severe effect on the economy, but markets have disconnected. The S&P 500 Index has jumped by a third since its low towards the end of March. Companies that need cash, those worried about delayed recovery and firms whose

Alexion Pharmaceuticals is either buying Portola Pharmaceuticals on the cheap at $1.4 billion, or paying a whopping premium – it all depends on your starting date. The deal means the $22 billion biotech snaps up a promising drug to reverse anticoagulants. The target has been on a downward slide for years, with the shares falling about 80% since the medication, Andexxa, was approved in 2018. But the buyer is shelling out a 132% premium based on Monday’s closing stock price. It’s more likely Alexion is overpaying. Portola’s drug can reverse popular blood thinners already used by more than 16 million

“You’ve got the brains, I’ve got the brawn, let’s make lots of money.” That’s Blackstone’s proposition for drugmakers like Alnylam Pharmaceuticals. The private-equity group is sinking up to $2 billion into the biotechnology company, including buying half the firm’s rights to future revenue from a cholesterol drug still under regulatory review. It’s a way to match Blackstone’s bulging wallet with Alnylam’s hefty costs while limiting exposure to volatile equity markets. Developing a new drug typically costs nearly $3 billion, according to a 2014 estimate by the Tufts Center for the Study of Drug Development. The size of the necessary bets