Deal to create pharmacy retailer with more than 12,700 stores nationwide

DEERFIELD, Ill., and CAMP HILL, Pa. — After headlines surfaced earlier in the day, Walgreens Boots Alliance Inc. made it official: The company has reached a deal to acquire Rite Aid Corp. for a total value of $17.2 billion.

The companies announced the deal late Tuesday. Under the agreement, Walgreens Boots Alliance will buy Rite Aid for more than $9 billion in cash, or $9 per share, a premium of 48% to Rite Aid’s closing share price on Oct. 26, the day before the deal was signed. The deal also includes the assumption of over $7 billion in net debt.

Plans call for Rite Aid to become a wholly owned subsidiary of Walgreens Boots Alliance upon completion of the merger, with the drug chain initially slated to operate under its current brand name. The companies said decisions will be made over time regarding the integration, “ultimately creating a fully harmonized portfolio of stores and infrastructure.”

In the United States, the deal joins the nation’s largest drug chain with its third-largest, creating a pharmacy retailer with more than 12,800 stores across the country.

“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy. In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, well-being and beauty products and services,” Walgreens Boots Alliance executive vice chairman and chief executive officer Stefano Pessina said in a statement. “This combination will further strengthen our commitment to making quality health care accessible to more customers and patients.”

Walgreens has 8,173 drug stores — including Duane Reade stores — in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Rite Aid, which had fiscal 2015 sales of $26.5 billion, operates 4,562 stores in 31 states and the District of Columbia.

“Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid’s customers while also delivering significant value to our shareholders,” stated Rite Aid chairman and CEO John Standley. “This transaction is a testament to the hard work of all our associates to deliver a higher level of care to the patients and communities we serve. Together with Walgreens Boots Alliance, the Rite Aid team can continue to build upon this great work through access to increased capital that will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and well-being enterprise.”

Walgreens Boots Alliance and Rite Aid said that coming together better enables the companies to deliver a high-quality retail pharmacy choice for U.S. consumers in “an evolving and increasingly personalized health care environment.”

“Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online,” Pessina explained. “Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. health care system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time.”

Walgreens Boots Alliance said it expects to finance the transaction through existing cash, assumption of existing Rite Aid debt and issuance of new debt. The transaction is expected to be accretive to Walgreens Boots Alliance’s adjusted earnings per share in its first full year after closing. Also, Walgreens Boots Alliance said it projects synergies of more than $1 billion.

Both companies’ boards have approved the transaction. Pending Rite Aid shareholder approval, the expiration or termination of waiting periods under the Hart-Scott-Rodino Act, and other customary closing conditions, the deal is expected to close in the second half of 2016.