Walgreens’ Rite Aid purchase wins FTC approval – Consumer News

on Sep19

19 September 2017 | 12:15 pm

(Bloomberg) — In its fourth attempt, Walgreens Boots Alliance Inc. clinched regulatory approval for a deal to buy Rite Aid Corp. stores after a last-minute reduction of the number of stores and price.

The drugstore chain said Tuesday it secured clearance for a revised deal under which it will buy 1,932 Rite Aid stores for $4.38 billion. That’s about 250 fewer stores than under a previous proposal, which totaled $5.18 billion.

The deal, once completed, will be a hard-won victory for Walgreens Chief Executive Officer Stefano Pessina, who has pushed for a transaction that could clear regulatory approval since the fall of 2015. The modified agreement, while reduced, will still enable Walgreens to dramatically expand its footprint and become a more powerful competitor for CVS Health Corp. With the addition of the Rite Aid stores, Walgreens will have about 10,000 locations in the U.S.

Store purchases are expected to begin in October and be completed in the spring of 2018, Walgreens said. Most of them are in the northeast and southern U.S., the company said.

Walgreens Boots Alliance Inc. is poised to revise its agreement to buy individual Rite Aid Corp. stores, a move that may be enough to resolve outstanding antitrust concerns and clinch U.S. approval for a deal the companies have been pursuing in different forms for two years, said people familiar with the matter.

Read more:

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Walgreens is in the final stage of negotiations with the Federal Trade Commission about its plan to buy more than 2,000 Rite Aid stores and is set to propose a modified deal that could be announced as soon as Monday, according to three people, who declined to be identified because the talks are confidential.

The deal would be a hard-won victory for Walgreens and its Chief Executive Officer Stefano Pessina, who has doggedly pushed for a transaction that could clear regulatory approval since the fall of 2015.

The companies and the FTC are close to an agreement that would allow the deal to proceed, said the people, who declined to discuss details of the revised transaction. The number of stores involved in the latest iteration won’t change dramatically, one of the people said.

Walgreens initially proposed a takeover of Rite Aid in October 2015 for $9 a share, or $9.4 billion. That deal ran into roadblocks at the FTC, and in January Walgreens and Rite Aid recut the deal in an attempt to resolve the agency’s concerns that the combination would hurt competition.

A revamped merger plan called for selling up to 1,200 Rite Aid locations to another buyer to satisfy the FTC and was worth at least $2 billion less to Rite Aid shareholders. That approach, which could have cost Walgreens as much as $7.37 billion, again failed to win over the regulator, and Walgreens terminated the plan in June.

The company said it instead would pay $5.18 billion to acquire 2,186 stores, leaving a slimmed-down Rite Aid as a stand-alone company. But that still wasn’t enough to satisfy the FTC. The final version of the deal that was announced Tuesday has about 12 percent fewer stores — and a lower price.



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