The Dow Jones Industrial Average (DJINDICES:^DJI) managed to turn positive by Monday afternoon, up 0.08% at 1:50 p.m. EST. Big gains for Walgreens Boots Alliance (NASDAQ:WBA) and Boeing (NYSE:BA) drove the Dow higher. Walgreens took a step closer to a go-private deal, and Boeing laid out an optimistic timeline for its 737 MAX.
The Walgreens buyout takes a step forward
Last week, reports emerged that drugstore chain Walgreens was exploring going private. Optimism was dampened the next day by analysts putting low odds on a deal of such magnitude. Including debt, Walgreens has an enterprise value of roughly $70 billion.
A deal became more likely on Monday after Bloomberg reported that private equity firm KKR & Co. has made a formal approach. KKR has been working on a proposal to take Walgreens private, according to Bloomberg's sources, even as other potential suitors have walked away. Shares of Walgreens were up 6.1% on the news.
A deal to take Walgreens private would be the largest leveraged buyout in history, and it would saddle Walgreens with even more debt. The company has been working to cut costs to shore up the bottom line, which has come under pressure in recent quarters. In Walgreens' fiscal fourth quarter, adjusted earnings per share were down 3.7%, despite billions of dollars spent reducing the share count via share buybacks. Adjusted operating income was down 12% from the prior-year period.
While Walgreens' overall U.S. retail pharmacy business grew sales in the fourth quarter, the retail portion of the business suffered a 3.9% sales decline. Walgreens is facing competition from Amazon, which recently began making many inexpensive personal products and household items eligible for free next-day shipping under its Prime membership program.
A deal is still far from a certainty, but the market became a little more optimistic to start the week.
Boeing predicts 737 MAX deliveries soon
Shares of Boeing shot up 4.2% after the airplane manufacturer and defense company said it expects its grounded 737 MAX planes to be back in the air in January. The company also said it's possible that it will resume deliveries of its 737 MAX planes in December.
The return of the 737 MAX won't happen until regulators give the go-ahead. Boeing is currently working on its updated training requirements, and the U.S. Federal Aviation Administration must complete an audit of the 737 MAX's software documentation before a certification test flight can be scheduled. Reuters reported last week that Boeing was forced to revise the software documentation due to multiple issues.
While Boeing is optimistic on the return of the 737 MAX, both American Airlines and Southwest Airlines have cancelled 737 MAX flights until early March. Southwest expects a return to service on March 6, while American set a date of March 5.
A resumption of 737 MAX deliveries can't come soon enough for Boeing. In the third quarter, Boeing delivered just 62 commercial airplanes, down 67% year over year. Total revenue was down 21%, while adjusted earnings per share plunged 59%.