CAMP HILL, Pa. — Walgreens Boots Alliance has taken over the first 97 of its acquired Rite Aid Corp. stores.
WBA purchased 1,932 stores under a revised deal with Rite Aid after the government thwarted its acquisition of the entire chain. WBA also picked up three distribution centers and related inventory from Rite Aid as part of the new $4.375 billion deal, which was announced in September.
Rite Aid and WBA expect to continue to transfer ownership of the stores in phases over the coming months, with the goal being to wind up the process in the spring.
“Successfully completing the pilot closing and first subsequent closings marks an important step in realizing the full benefits of this transaction,” said Rite Aid chairman and chief executive officer John Standley. “I am proud of the entire Rite Aid team for their commitment and dedication to helping us reach this milestone. I also want to thank our team for their continued support as we complete the transfer process over the next several months and implement our plans to deliver improved results.”
Rite Aid expects to use a substantial majority of the net proceeds from the transaction to pay off debt. It expects to incur a minimal cash tax payment on the deal, as the gain it will record on the sale of the assets is expected to be largely offset by its net operating loss carry-forwards.
The September deal, which amended an agreement announced in June, reduced the number of stores being bought by 254 and cut the price by $800 million. The June agreement marked the termination of WBA’s $14 billion deal to acquire Rite Aid. It began winding down a nearly two-year process that started in late October 2015 with the announcement of the Walgreens-Rite Aid merger deal and a subsequent antitrust review by the Federal Trade Commission.
Antitrust concerns plagued the proposed merger, prompting the longest review in FTC history. A planned divestiture of 865 Rite Aid stores to Fred’s Inc. was intended to alleviate the concerns, but Fred’s problems with its own stores may have caused the agency to question its worthiness as a buyer. A ruling by the agency was to have been issued by July 7.
Announcing the September deal, WBA executive vice chairman and CEO Stefano Pessina said, “This is a significant moment for our company, and we are excited about the opportunities this agreement will deliver for our customers and patients, employees and investors. Combining Walgreens’ retail pharmacy network with a strong portfolio of Rite Aid locations is expected to help us achieve enhanced, sustainable growth while enabling us to broaden our reach and provide greater access to convenient, affordable care in more local neighborhoods across the United States.”
The store transfer will leave Rite Aid with around 2,575 outlets.