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Walgreens, Rite Aid deal is downsized

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Twenty months ago, Walgreens Boots Alliance announced a $17.2 billion deal to acquire Rite Aid Corp. On Thursday, in the wake of a protracted antitrust review by the Federal Trade Commission, the two companies opted to call of the Walgreens-Rite Aid merger and struck a new agreement.

Under the new deal, WBA is slated to buy 2,186 stores, three distribution centers and related assets for $5.175 billion in cash, the assumption of related real estate leases from Rite Aid. In addition, Rite Aid gets an option join the Walgreens Boots Alliance Development GmbH group purchasing organization for pharmaceuticals, as well as a a termination fee of $325 million from WBA. The transaction is expected to be completed in the next six months, pending FTC approval and other closing conditions.

The cancellation of the Walgreens-Rite Aid merger also terminates the companies’ deal to sell up to 1,200 Rite Aid stores to Fred’s Inc. The divestitures were expected to enable WBA to gain FTC approval for the Rite Aid acquisition. Fred’s had agreed to pay $950 million to purchase at least 865 Rite Aid stores, or more if the FTC required additional divestitures for the WBA-Rite Aid deal.

WBA and Rite Aid had amended the merger agreement on Jan. 30., requiring approval from Rite Aid shareholders. The revised price for the deal was $6.50 to $7.00 per share, putting the cash portion of the transaction at about $6.84 billion to $7.37 billion — depending on the number of store divested — plus the assumption of Rite Aid’s debt. The original acquisition offer on Oct. 27, 2015, was for $9 per share and the assumption of over $7 billion in net debt, for a total deal value of $17.2 billion.


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