(Reuters) -Walgreens Boots Alliance has suspended its quarterly cash dividend amid restructuring efforts, the U.S. pharmacy chain operator said on Thursday, sending its shares down nearly 8% in extended trading.
“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,” Walgreens said in a statement.
The dividend suspension is “prudent and somewhat overdue,” said Leerink Partners analyst Michael Cherny.
“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,” Cherny said.
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. The company has declined to comment on the reports.
The decision comes weeks after the U.S. Department of Justice filed a lawsuit alleging that the pharmacy chain knowingly filled 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 chain in the U.S., 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 program and exploring options for its non-core businesses, as he tries to kick-start growth and gain back investor confidence.
(Reporting by Mariam Sunny in Bengaluru; Editing by Alan Barona)
