DEERFIELD, IL—Published reports Monday suggested that Walgreens Boots Alliance might be able to pull off its scuttled merger with Rite Aid Corp. after all. However, the two drugstore chains announced Tuesday that they'd received Federal Trade Commission approval for an amended purchase agreement building on the one that emerged after the M&A deal collapsed in late June. WBA accordingly will go ahead and acquire 1,932 Rite Aid locations and three distribution centers for $4.375 billion in cash and other consideration.
The scope of the acquisition is smaller than the agreement announced in June for WBA to buy 2,186 Rite Aid stores for $5.175 billion. The amended agreement also calls for WBA to assume the leases on the stores it's buying from Camp Hill, PA-based Rite Aid, and gives Rite Aid an option to purchase generic drugs at a lower cost through Walgreens Boots Alliance Development GmbH, WBA's group purchasing organization.
“Combining the 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,” says Stefano Pessina, executive vice chairman and CEO of WBA. “We are confident in the path ahead and look forward to working together to shape the future of health care and deliver on the full potential these stores bring to our network.”
Store purchases, covering mainly the Northeast and Southern US, are expected to begin next month and conclude by next spring. After all 1,932 stores are acquired, the Rite Aid locations are planned to be converted to the Walgreens brand in phases over time.
The three Rite Aid distribution centers to be purchased are located in Dayville, CT, Philadelphia and Spartanburg, SC. The transition of these distribution centers to Walgreens will not begin for at least 12 months, WBA said Tuesday.
Separately, New York State's attorney general, Eric Schneiderman, said Tuesday that WBA would be buying fewer Rite Aid stores across the state than originally planned. The deal announced in June would have entailed WBA acquiring 456 Rite Aid locations in New York State alone; that number has been reduced to 272.
Schneiderman said the revised deal's footprint of acquisitions in neighboring New Jersey and Connecticut will also be smaller. The state AG said he sought the changes in order to help maintain competition among drugstores in the region
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
