The Walgreens Billionaire Watching His Empire Come Apart

 Stefano Pessina spent half a century building a pharmacy behemoth that stretches almost three times further than the Roman empire ever did. Now he may have to watch it come apart.

This week, the Italian billionaire and biggest shareholder of Walgreens Boots Alliance, backed a deal to sell the company to a private-equity firm that will likely dismantle the conglomerate and sell it for parts.

It’s a personally searing epilogue to a stunning career characterized by Pessina’s fierce, and—as he describes it—“very cold” approach to dealmaking that involved buying more than 1,000 businesses. Pessina himself isn’t ready to leave. As part of the deal to take Walgreens private in one of the biggest leveraged buyouts in recent memory, Pessina would roll his roughly 17% stake into the new entity.

The 83-year-old is often cited as the richest man in Monaco, but largely eschews the city-state’s opulent lifestyle. He’s a ruthless dealmaker, but described often as humble. He runs one of the world’s largest health companies, but has fought to keep cigarettes on his shelves.

In 2006, in the midst of a coup that would see his Alliance UniChem takeover the storied British chain Boots, local press clamored to make sense of the billionaire figure, who—even in his birth country, Italy—remained a mystery.

Hyper rational and quietly confident, he was described in a 2007 Guardian article as having a tendency to “gargle” his ‘r’s—a dead giveaway in Italy of his upper-middle class upbringing. He had found romance in one of his early deals, the purchase of a drug wholesaler from Ornella Barra, who would later become his second wife. She is now chief operating officer of Walgreens’ international business.

“Is he great fun? No, he is not,” Nigel Rudd, the former Boots chairman, told the Financial Times in a 2019 interview. “He is remorseless, just awesome actually. I rank him as one of the most talented business people and deal-doers I have ever met.”

A spokesman for Walgreens said Pessina declined to comment.

A graduate in nuclear engineering, Pessina abandoned academia in 1968 feeling alienated from the rise of radical student activism on campus. He stayed in Milan to work for a marketing firm when the bombing of Milan’s Piazza Fontana by far-right fascist groups kick-started almost two decades of political violence, terrorist attacks and assassinations across Italy.

In 1977 he took over his father’s fledgling and failing pharmaceutical wholesaler. It was there that he got his taste for dealmaking. He spent the next 20 years expanding at an interminable pace, at times taking on loss-making businesses from owners who were desperate to exit. He believed scale was needed to compete.

The business had grown too big for Italy’s boot, pushing him to expand his conquest beyond the border. He started in France, then moved to Spain, Greece and Morocco, and in 1997 he combined with UniChem which gave his budding empire a foothold in Britain.

But it was his 2006 deal to combine with the 175-year-old British retailer, Boots, that captured the attention of his much bigger U.S. rivals. The deal was partly negotiated with Rudd on the deck of Pessina’s yacht, which he kept moored off the coast of Sardinia. It expanded Pessina’s reach from more than 1,000 stores to about 3,000, but it came at a time when British retailers were collapsing at a rapid rate.

At first, it didn’t go well. It was his first time tussling with the particulars of leading a public company and he found the board slow and overly conservative, the British press wrote at the time. He was agitated by the focus on quarterly reports, the scrutiny from financial analysts, and questions about the role in the company given to his romantic partner, Barra.

His solution was mutiny. Just over six months after Boots and Alliance combined, he orchestrated a historic leveraged buyout of the combined entity in a $22 billion deal backed by the U.S. buyout giant KKR. It remains the biggest take-private deal in European corporate history.

His ambition became to go global, and that meant getting a foothold in the U.S.

Initially Walgreens purchased a 45% stake. Then in December 2014, it came back for the rest for a combined total, including stock, of $22 billion.

It was about the same price Pessina and KKR had paid to take the company private, but with two major coups for Pessina: with a roughly 17% stake, he was now the largest shareholder of the combined Walgreens Boots Alliance and, despite being executive chairman of the smaller entity, Pessina was given the reins.

Pessina’s empire had reached its pinnacle. Its more than 13,000 stores stretched from Norway to Chile, Alaska to Thailand, with a market cap of over $100 billion dollars.

The Walgreens deal also began his empire’s decadelong decline.

With the rise of Amazon quickly eating into drugstores’ nonmedical revenues, he spent billions buying more stores. He fought against pushes from other senior executives that saw an incongruence between selling health products while keeping cigarettes and beer on its shelves. CVS, his biggest rival, itself stopped selling tobacco products in 2014.

And he was convinced that the real opportunity was in convincing shoppers to trust Walgreens not only to fill prescriptions and sell them deodorant and nail polish, but to diagnose and manage their long-term health conditions. Roughly 60% of Americans have chronic conditions, according to the U.S. Centers for Disease Control and Prevention, and many are hospitalized for failing to take their medicines as prescribed.

Walgreens had made an earlier bet on Theranos founder Elizabeth Holmes to use its blood-test technology to create health hubs in its stores. The startup was later revealed to be a fraud. Pessina ended the partnership he inherited and in 2017 sued Theranos for $140 million before reaching a settlement for an undisclosed sum.

That year Pessina expressed concerns about the distrust and antibusiness sentiment that was bubbling up across in the U.S., a cultural shift that he saw as hurting his business.

By 2019, Walgreens had already lost about a third of its value since its peak, and, at its Deerfield, Ill., headquarters, Pessina was grumbling about the short-termism that came with running a public company.