Walgreens Merger With Rite Aid Falls Apart

NEW YORK — A $10 billion mega-merger between two of the nation’s largest drug stores is no more.

Walgreens and Rite Aid announced Thursday that they are no longer combining forces. Not entirely, at least.

Instead, Walgreens agreed to buy 2,186 Rite Aid stores for $5.2 billion. That will essentially cut Rite Aid in half, leaving it with 2,350 stores after the deal is done.

The merger agreement faced intense scrutiny from the start. It would have left the United States with just two major pharmacy chains: Walgreens and CVS. The Federal Trade Commission was scheduled to rule on the merger Thursday and was widely expected to nix it.

The old deal was two years in the making. Initially, a $17 billion deal announced in October 2015, the agreement was reworked in December 2016 and scaled back in January 2017.

Michael Polzin, a spokesman for Walgreens, declined to comment on whether the looming FTC decision finally scuttled the deal. But he acknowledged that the FTC had raised concerns, and the company is confident that buying a couple thousand Rite Aid stores will pass muster with regulators.

The Rite Aid pharmacies that Walgreens plans to buy will eventually be rebranded as Walgreens stores. That won’t happen for a while, though: The deal first needs to gain regulatory approval, and then Walgreens plans to buy up the Rite Aid stores over the course of six months.

Because there are so many stores in the deal, it could take two to three years for the thousands of Rite Aid stores to become Walgreens stores. So save your Wellness+ card.

Walgreens will pay Rite Aid $325 million for canceling the merger. But it expects the store purchases to save it more than $400 million over time.

The deal comes at a crucial time for Rite Aid and the retail business as a whole. Both companies also reported their quarterly financials, and they told two very different stories: Walgreen’s earnings rose 5%, sales were up 2% and the company even raised its outlook for this quarter. Rite Aid meanwhile reported a loss and sales that fell by 5% last quarter.

Shares of Rite Aid tanked 10% in premarket trading, after falling 20% on Wednesday and 7% on Tuesday. Walgreens rose 2%.

3 comments

  • RicU.

    Anyone following Rite Aid Drugs, yes, the symbol is RAD, since the early 2000’s knows RAD has had a series of awful management teams. Threatened with being delisted by NASDAQ for being under $1.00 a share several times, it has struggled to stay alive. Surviving has meant finding a buyer capable of having deep enough pockets to cover the debts. Walgreen could have done that but continuous cashflow problems in RAD appears to have damaged the deal. Remarkably, Walgreen is going to need a RAD to survive in a WalMart Superstore environment.

  • Caesar

    Their goes my investment in Rite Aid stock. Now I’m going to have to work at the Dutch Kitchen in Frackville forever. I miss Al’s Seafood.

  • LONGGREYSOCKS

    Rite aids terrible. The one in frackville dont sell the long grey tube socks. Maybe walgreen does never been in one before.

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