DEERFIELD, Ill. — Walgreens Boots Alliance Inc. (WBA) has taken action to force the hand of federal regulators deciding whether to approve its pending acquisition of Rite Aid Corp.
WBA and Rite Aid last month notified the Federal Trade Commission that they have complied with the agency’s second request for information on the deal. While that triggered a 60-day deadline for the commission to OK the Walgreens-Rite Aid merger or sue to block it, the FTC apparently still wants to know more.
The New York Post reported that the FTC has issued civil investigative demands (CIDs) to Walgreens vendors and competitors to get more information for its antitrust review. Citing unnamed sources, the Post said the CIDs could indicate that the FTC isn’t ready to clear the transaction, announced nearly 20 months ago. Yet the Post noted that the issuance of CIDs doesn’t mean the FTC won’t end up approving the deal.
“We are pleased to have certified completion of our submission of documents and information to the FTC in connection with the second request,” said WBA executive vice chairman and chief executive officer Stefano Pessina. “We will continue to work closely with the FTC regarding the pending transaction.”
“Our teams did a tremendous amount of work to deliver to the FTC the information to substantially comply with the second request,” said Rite Aid chairman and CEO John Standley.
The FTC’s decision may hinge on the proposal by Walgreens and Rite Aid to sell 865 stores or more to Fred’s Inc. Regulators have been concerned about the Memphis-based regional chain’s ability to compete if the merger is approved, according to people familiar with the matter.
“It’s not helping Rite Aid and Walgreens that Fred’s is having its own troubles,” Andrea Agathoklis Murino, an antitrust lawyer at Goodwin Procter LLP in Washington, D.C., told Bloomberg.
WBA and Rite Aid amended the merger deal in late January, requiring approval from Rite Aid shareholders. The revised price for the deal is $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 assumption of debt. The original acquisition offer on October 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.
One cause for pessimism about the merger’s prospects is that some transactions green-lighted by the FTC in recent years included divestitures that failed to meet expectations.
Last month, the FTC cleared a sale effectively unraveling the original deal it had approved for Dollar Tree Inc.’s acquisition of Family Dollar Stores Inc. Under the original terms, Dollar Tree agreed to sell more than 300 Family Dollar outlets to private equity firm Sycamore Partners. This year, less than 24 months later, Sycamore asked to sell the stores to Dollar General Corp., saying it was no longer feasible for it to operate the stores.
And the FTC is assessing the WBA-Rite Aid deal with three of its five seats unfilled. President Trump has yet to name a permanent commission leader, and the only members are Democrat Terrell McSweeny and Republican Maureen Ohlhausen, who is the acting chairwoman.