Merger is off; WBA agrees to buy 2,186 Rite Aid stores
DEERFIELD, Ill. — The long, drawn-out quest of Walgreens Boots Alliance Inc. (WBA) to acquire Rite Aid Corp. took another unexpected turn this morning when the two companies announced a new agreement under which WBA will purchase 2,186 stores, three distribution centers and related inventory from Rite Aid.
The price will be $5.175 billion in cash, the assumption by WBA of the related real estate leases and the grant of an option to Rite Aid, exercisable through May 2019 and subject to certain conditions, to become a member of WBA’s group purchasing organization, Walgreens Boots Alliance Development GmbH. WBA will also assume certain limited store-related liabilities as part of the new transaction.
The deal announced today replaces the previous merger agreement between the two drug chains announced in October 2015 and amended in January 2017, and the agreement to divest certain Rite Aid stores to Fred’s Inc. announced in December 2016. Both of these agreements have been terminated, and WBA will pay Rite Aid the $325 million termination fee called for by the initial merger agreement.
The new transaction is subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and other customary closing conditions. The initial closing of the new transaction is expected to occur within the next six months. Upon the initial closing of the new transaction, WBA will begin acquiring the stores and related assets on a phased basis over a period of approximately six months, and it intends to convert acquired stores to the Walgreens brand over time.
Antitrust concerns plagued the initial merger deal, prompting the longest review in Federal Trade Commission history. A ruling by the agency was to have been issued by July 7.
“This new transaction extends our growth strategy and offers additional operational and financial benefits,” says WBA vice chairman and chief executive officer Stefano Pessina. “It will allow us to expand and optimize our retail pharmacy network in key markets in the U.S., including the Northeast, and provide customers and patients with greater access to convenient, affordable care. We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders.”