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Portfolio Manager Cole Smead Says Warren Buffett Is Watching Walgreens

Jayson Derrick

Walgreens Boots Alliance Inc (NASDAQ: WBA) is reportedly evaluating an offer to sell itself to private equity giant KKR, and Warren Buffett could insert himself into the saga, a portfolio manager told CNBC Tuesday. 

Wall Street analysts and the financial media community are almost unified in speculating that a KKR acquisition of Walgreens won't play out, Cole Smead, managing director and portfolio manager at Smead Capital Management, said on CNBC's "Squawk Box." 

Behind the scenes, Walgreens CEO Stefano Pessina is the largest shareholder, and he has worked with KKR in the past to take Alliance Boots private, Smead said. 

The deal talks could even see Buffett taking a stake through warrants or equity, adding that Walgreens boasts a lot of the franchise opportunities that Buffett likes.

Smead: Buffett Could Replicate Occidental Play 

Walgreens is a "great American business" with consistent earnings power, Smead said.

Close observers are quick to point out Buffett likely has zero interest in getting involved in a pharmacy chain.

Yet few imagined the "Oracle of Omaha" being interested in taking a stake in Occidental Petroleum Corporation (NYSE: OXY), but he did to the tune of $10 billion, Smead said. 

Many of Buffett's recent deals involve the use of preferred shares with warrants, and this represents the risk profile one would want in a buyout, he said.

If a deal works out, there is "immense upside" in the shares, and it's an identical scenario to what Buffett did with Occidental, Smead said. 

Walgreens shares were down 2.08% at $59.41 at the time of publication. 

Related Links:

Why Walgreens Could Be Valued At /Share In A Leveraged Buyout

A Closer Look At How A Walgreens Buyout Could Play Out

Photo by MusikAnimal via Wikimedia

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