Walgreens drops Rite Aid takeover, but will buy 2,186 stores
The deal is dead, long live the other deal.
Illinois-based Walgreens Boots Alliance announced this morning that it will not pursue plans to purchase Cumberland County-based Rite Aid Corp.
Instead, Walgreens reached a deal to purchase 2,186 stores -- about half of Rite Aid's total -- as well as three distribution centers and related inventory from Rite Aid for $5.175 billion in cash.
"This new transaction extends our growth strategy and offers additional operational and financial benefits," Walgreens Executive Vice Chairman and CEO Stefano Pessina said.
A proposed $9-per-share acquisition Rite Aid by its larger rival was announced in fall 2015, but the deal remained incomplete due to lingering antitrust concerns.
But Walgreens set a final clock ticking on May 8. That's when the company "certified compliance" with FTC requests for information in the deal. That gave the commission 60 days to decide whether to approve the deal or sue to oppose it.
Now, Walgreens will pay Rite Aid a $325 million termination fee for ending the original agreement, and the nation's largest pharmacy chain prepares to acquire a large chunk of its rival's stores.
"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," Pessina said.
"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."
The 2,186 stores included in the agreement are primarily located in the Northeast, Mid-Atlantic and Southeastern regions, officials said.
The three distribution centers included in the agreement are located in Dayville, Conn., Philadelphia and Spartanburg, S.C.
Under the terms of the agreement, Rite Aid will provide certain transition services to WBA for up to three years after the closing of the transaction.
The transaction, which is expected to close within six months, has been approved by the companies' boards. Like the deal it succeeds, it is subject to antitrust clearance.
"While we believe that pursuing the merger with WBA was the right thing to do for our investors and customers, this new agreement provides a clear path forward and positions Rite Aid as a strong, independent, multi-regional drugstore chain and pharmacy benefits manager with a compelling footprint in key markets," Rite Aid Chairman and CEO John Standley said.
"I would like to thank our entire Rite Aid team for their extraordinary efforts during this process and their tremendous focus on taking great care of our customers and patients," he added.
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