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Walgreens: We’ll shed more stores to make Rite Aid deal work

Today's news is a reversal of a July statement by Walgreens CEO Stefano Pessina.

Walgreens Boots Alliance expects to shed more stores than previously planned to make its proposed acquisition of Rite Aid Corp. meet concerns addressed by federal regulators.

But the Illinois-based company still expects the $17.2 billion deal to close by year’s end, according to a statement released today through the Federal Trade Commission.

The planned $9 per share merger was announced in late October.

In July, Walgreens CEO Stefano Pessina, in an investors conference call added that he expected the combined company would only have to divest itself of about 500 stores to satisfy regulators’ antitrust concerns. Now, it looks like the number will be between 500 and 1,000 “in order to expedite the process,” the company announced today.

Walgreens, the nation’s top pharmacy chain, has about 8,200 stores nationwide. Cumberland County-based Rite Aid — number 3 in the nation, behind CVS — has about 4,600 stores across the country. More than 70 of Rite Aid’s stores are in the midstate, where there are only a handful of Walgreens stores.

“Walgreens Boots Alliance and Rite Aid remain actively engaged with the Federal Trade Commission (FTC) regarding its review of the pending acquisition,” the statement added.

“As a result of the progress of these discussions with the FTC staff, Walgreens Boots Alliance is exploring potential divestiture remedies to address certain issues raised in those discussions.”

Walgreens added that they expect to realize $1 billion in synergies — savings, in lay terms — within three to four years of closing on the deal.

“These synergies have been updated where practicable and, as previously disclosed, are expected to be derived primarily from procurement, cost savings and other operational matters.”

What Walgreens has yet to disclose is what the long-term future holds for the Rite Aid brand, from its headquarters in East Pennsboro Township to its stores across the region and the nation. Such matters are likely to become more clear once the deal is completed.

“When we announced the merger, we said we will make decisions over time regarding the integration of our two companies, ultimately creating a fully harmonized portfolio of stores and infrastructure,” Walgreens spokesman Michael Polzin told CPBJ. “I don’t have anything more I can add for you at this point.”

Roger DuPuis
Roger DuPuis covers Cumberland County, health care, transportation, distribution, energy and environment. Have a tip or question for him? Email him at [email protected].

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