PLAN B: Walgreens Opts to Obtain, Rebrand Rite Help Stores Outright After Combination Fails to Win Regulatory Approval
Walgreens Boots Alliance Inc. officially ended its offer to combine with Rite Aid Corp. and instead will pay just under $5.18 billion to buy 2,186 of the rival pharmacy chain’s stores.
The ditching of the merger following months of speculation about whether the Federal Trade Commission would try to obstruct the offer, most just recently estimated to be worth $12.4 billion to $13.4 billion.
The relocation likewise scuttles an associated transaction to sell specific Rite Aid shops to Fred’s Inc. in order to assist win antitrust approval.
This brand-new contract changes the previous merger with Rite Aid which was revealed in October 2015. The chains amended the handle January to divest specific Rite Help shops to the Memphis, TN-based Fred’s, Inc. drug store chain.
In a statement, Rite Help stated the decision to end the merger follows feedback gotten from the FTC that “led the company to believe that the parties would not have actually gotten FTC clearance to practiced the merger.”
Walgreens (Nasdaq: WBA) will pay Rite Aid a $325 million termination charge for ending the merger arrangement. Fred’s will receive $25 million as reimbursement for expenses connected with the transaction.
Putting his finest spin on exactly what he called a “frustrating outcome,” Fred’s Inc. CEO Michael K. Flower stated the termination would have no influence on the business’s “change method” or capability to execute.
“While the acquisition of additional shops was an opportunity for development, we always viewed it as a potential result that would accelerate our transformation, not define it,” Flower stated in a declaration today.
After the new deal closes in about 6 months, Walgreens will start obtaining the shops and related assets, with strategies to transform most to the Walgreens brand.
Walgreens anticipates the brand-new deal to be modestly accretive to adjusted diluted net profits per share in the very first complete year after the initial closing and anticipates to recognize more than $400 million in cost savings within three to 4 years, primarily from procurement, expense savings and other functional concerns.
In a statement released early Thursday, Walgreens Boots Alliance Executive Vice Chairman and CEO Stefano Pessina said the brand-new transaction, “will allow us to expand and enhance our retail pharmacy network in essential markets in the United States, including the Northeast, and provide consumers and clients with higher access to practical, affordable care.
“We believe this new deal addresses competitive concerns previously raised with respect to the prior deal,” he added.