Walgreens Boots Alliance has suspended its quarterly cash dividend amid restructuring efforts, the US-based company said on Thursday.
The announcement sent shares for the company down 8% in extended trading.
In a statement, Walgreens said, “The company’s cash needs over the next several years, including with respect to litigation and debt refinancing, were important considerations as part of the decision to suspend the dividend.”
Leerink Partners analyst Michael Cherny said the dividend suspension is “prudent and somewhat overdue.”
Cherny said, “We see this as the right move for Walgreens’ ability to reboot the business but the near-term dynamic is the forced technical selling that will likely have to occur given the company will no longer be income-generating.”
The company was looking to sell itself to private equity firm Sycamore Partners and had also reached out to other potential buyers, according to media outlets.
Walgreens Boots Alliance has declined to comment on the reports.
Lawsuit
The decision comes weeks after the US Department of Justice filed a lawsuit alleging that the pharmacy chain knowingly filed millions of prescriptions that lacked a legitimate medical purpose.
If found liable, Walgreens could face civil penalties of up to $80,850 for each unlawful prescription according to the Justice Department.
Walgreens – which operates the second-largest pharmacy change in the US – has said it plans to shut thousands of stores pressured by persistently low drug reimbursement rates and consumers avoiding high-priced grocery items.
CEO Tim Wentworth has unveiled a series of changes, including a $1 billion cost-cutting programme and exploring options for its non-core businesses, as he tries to kickstart growth and gain back investor confidence.
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