Walgreens Boots Alliance is set to revise its agreement to buy some Rite Aid stores to resolve outstanding antitrust concerns, according to Bloomberg. Roselle Chen reports.
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Walgreens, the big drug store chain, is going to take over more than 1,900 Rite Aid drug stores — though not as many as it wanted.
Walgreens Boots Alliance agreed to buy about 250 fewer stores from Rite Aid than it had previously planned to acquire. The deal comes as part of a revised plan that has received regulatory approval after multiple previous deals had flopped.
Walgreens said Tuesday that it had received the government’s sign-off to take over 1,932 Rite Aid stores and three distribution centers.
The revised deal preserves the three largest drugstore chains as independent entities, but the new agreement will still make Walgreens the nation’s largest by number of locations, edging archrival CVS Health.
Walgreens will have nearly 10,000 locations following the deal. CVS has more than 9,600. Rite Aid will still have more than 2,500.
The company will pay $4.4 billion and assume leases. It will also authorize Rite Aid to take advantage of its much larger size and clout with suppliers to drive better prices, which will make it more competitive.
Walgreens sought a takeover of Rite Aid in October 2015. Then the deal was downsized in June to include Walgreens buying 2,186 stores, three distribution centers in a deal worth $5.2 billion. The final deal announced Tuesday marks yet another revision.
Walgreens terminated its merger with Rite Aid, but despite leaving the deal behind, Walgreens will pay $5.175 billion in cash to buy 2,186 Rite Aid stores.
“This is a significant moment for our company, and we are excited about the opportunities this agreement will deliver for our customers and patients, employees and investors,” Walgreens Boots Alliance CEO Stefano Pessina said in a statement.
Walgreens said it would slowly convert the acquired stores into its own brand. The locations are primarily in the Northeast and South.
Walgreens and Rite Aid changes in the New York City metropolitan area illustrate how the companies altered the original deal to address arguments that it would stifle competition.
Walgreens at first proposed to acquire 456 Rite Aid stores in greater New York, but now will take over 272 locations, leaving Rite Aid with 327 sites, according to data from New York Attorney General Eric Schneiderman’s office. Similarly, Walgreens will acquire 34 fewer stores in New Jersey and 13 fewer locations in Connecticut.
“Vigorous competition between pharmacy chains keeps down the cost of filling a prescription, which benefits New York consumers and businesses by preserving choice and keeping costs low,” said Schneiderman, whose office had raised concerns about the initial deal terms.
The company expects to save about $300 million annually through cost cuts, procurement savings “and other operational matters” within four years.
Jim Cramer, TheStreet’s action alerts portfolio manager, isn’t fond of how Rite Aid is being managed. Its merger with Walgreens Boots Alliance is still pending. Video provided by TheStreet
Contributing: Kevin McCoy
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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