According to recent filings with the Securities and Exchange Commission, WBA and Rite Aid agreed to withdraw their initial Hart-Scott-Rodino (HSR) Antitrust Improvements Act notification and report filing, dated July 17, and refile it with the Department of Justice and the Federal Trade Commission by August 18.
The move would reset the companies’ HSR waiting period to expire on September 18, unless otherwise extended or terminated.
Under the HSR Act, the waiting period is typically 30 days. The parties may not close their deal until that period has passed.
Back on June 29, WBA and Rite Aid announced the termination of their $14 billion merger deal and unveiled a new pact in which WBA plans to buy 2,186 stores, three distribution centers and related inventory from Rite Aid for $5.175 billion in cash. WBA also agreed to pay Rite Aid a $325 million merger termination fee.
The cancellation of the Walgreens-Rite Aid merger also meant the termination of a deal with Fred’s Inc. to acquire stores slated for divestiture. In December 2016, Fred’s had agreed to buy 865 or more Rite Aid stores in connection with the merger.
WBA’s original acquisition offer for Rite Aid in October 2015, was for $9 per share and the assumption of more than $7 billion in net debt, for a total deal value of $17.2 billion.
WBA and Rite Aid amended the merger agreement on January 30, 2017. 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 stores divested — plus the assumption of Rite Aid’s debt.
Rite Aid and WBA had said at the time they expected to finalize the new transaction in the next six months, pending FTC approval and other closing conditions.
“Walgreens and Rite Aid have publicly stated they have reached a new agreement relating to certain Rite Aid assets,” the FTC said in its statement. “The FTC will review any new transaction proposed by the parties under the statutes enforced by the commission, as may be applicable.”
Yet Wolfe Research analyst Scott Mushkin contends that competitive snags remain with the downsized deal and approval from the FTC isn’t a certainty.
“We struggle to see how a Rite Aid ‘light’ merger will be any more palatable to the FTC than the original transaction, as many of the East Coast markets WBA wants to purchase have clear market-share concentration issues,” Mushkin wrote in a research note.
He added, “We would anticipate that the company would at a minimum need to divest a number of stores in certain markets, and there remains a strong possibility that the FTC could move to block the new proposal altogether.”