Walgreens calls off Rite Aid takeover

Walgreens Boots Alliance has scrapped its two-year wooing of Rite Aid Stores Inc, instead opting to buy about half the chain’s stores in a new $5.157 billion deal. This move comes as a result of scrutiny by federal antitrust regulators.

 

The new deal covers 2,186 stores, three distribution centres, and inventory from Rite Aid, says the company. It also replaces a previous merger agreement with Rite Aid, which began in October of 2015. Valued at $9.4 billion, the original deal was amended earlier in 2017 to accommodate more divestitures.

 

The October 2015 deal also included another agreement with Fred’s Inc., which included the acquisition of nearly 1,000 Rite Aid stores. This transaction has also been cancelled.

 

“This new transaction extends our growth strategy and offers additional operational and financial benefits,” notes Stefano Pessina, CEO of Walgreens. “It will allow us to expand and optimize our retail pharmacy network in key markets in the U.S., including the Northeast, and provide customers and patients with greater access to convenient, affordable care. We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders.”

 

Walgreens is set to begin the acquisition of these new assets over a period of approximately six months. It also plans to eventually convert the new stores to the Walgreens brand. Walgreens has also agreed to pay Rite Aid a $325 million cash termination fee.

 

“While we believe that pursuing the merger with WBA was the right thing to do for our investors and customers, this new agreement provides a clear path forward and positions Rite Aid as a strong, independent, multi-regional drugstore chain and pharmacy benefits manager with a compelling footprint in key markets,” says Rite Aid CEO John Standley. “The transaction offers clear solutions to assist us in addressing our pharmacy margin challenges and allows us to significantly reduce debt, resulting in a strong balance sheet and improved financial flexibility moving forward.”