Walgreens scraps Rite Aid
takeover, to buy half its stores
Send a link to a friend
[June 29, 2017]
(Reuters) - Drugstore chain
Walgreens Boots Alliance Inc terminated its deal to buy Rite Aid Corp
after struggling to win antitrust approval, and said it would instead
buy nearly half of the smaller rival's U.S. stores for $5.18 billion in
Walgreens also said on Thursday it ended a related deal to sell 865 Rite
Aid stores to Fred's Inc <FRED.O>, sending Fred's shares down 27 percent
in premarket trading.
Rite Aid's shares plunged 17 percent to $3.24, while Walgreens shares
were up 4.4 percent at $80.51.
Walgreens offered to buy Rite Aid for $9.5 billion in October 2015, but
struggled to gain approval as regulators worried that a merger between
the No. 1 and No. 3 drug chains in the United States would stymie
"We believe this new transaction addresses competitive concerns
previously raised with respect to the prior transaction," Walgreens
Chief Executive Stefano Pessina said in a statement.
Walgreens said it expects the initial closing of the deal within six
months, after which it will begin buying the 2,186 Rite Aid stores and
convert them to Walgreens.
Walgreens also reported better-than-expected profit and sales for the
third quarter, helped by a rise in prescription volumes in its pharmacy
business in the United States.
The company also authorized a $5 billion buyback program and raised the
bottom end of its full-year profit forecast by 8 cents per share to a
range of $4.98 to $5.08.
[to top of second column]
The Walgreens logo is seen outside the store in Times Square in New
York, U.S., July 5, 2016. REUTERS/Shannon Stapleton
Analysts on average were expecting full-year profit of $4.96 per share,
according to Thomson Reuters I/B/E/S.
Rite Aid, which had nearly 4,600 stores in the United States as of May, said the
stores included in the deal are primarily located in the Northeast, Mid-Atlantic
The deal also consists of three distribution centers located in Connecticut,
Philadelphia and South Carolina.
Rite Aid will provide certain transition services to Walgreens for up to three
years after the deal closes.
The new deal is expected to modestly add to adjusted earnings per share in the
first full year after close and generate savings of more than $400 million,
The company said it would pay Rite Aid a $325 million termination fee.
(Reporting by Siddharth Cavale in Bengaluru; Editing by Sriraj Kalluvila)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.