Walgreens halts its effort to acquire Rite Aid and will instead buy 2,000 of its stores.
CHICAGO — Walgreens Boots Alliance is scuttling its yearslong effort to buy competitor Rite Aid and will instead buy more than 2,000 of its stores for $5.18 billion.
The less-ambitious move follows resistance from federal regulators since the two drugstore chains first proposed a merger in 2015. Thursday’s announcement represented the second time the two companies have tinkered with terms of a transaction, as they tried to win approval from the Federal Trade Commission.
Walgreens, based in suburban Chicago, also has agreed to pay Camp Hill, Pa.-based Rite Aid a $325 million fee for ending the earlier agreements.
Under the terms of the new deal, Walgreens will acquire 2,186 Rite Aid stores, representing about half of its locations, three distribution centers and other Rite Aid inventory. Walgreens expects to convert the Rite Aid stores into Walgreens stores. The deal is expected to close within the next six months, pending regulatory approval.
“Given the changes in the market during the longer than expected Federal Trade Commission review process and the ongoing uncertainty about the potential outcome, we have decided, after detailed discussion with Rite Aid, not to continue to pursue the acquisition of the whole company,” said Walgreens CEO Stefano Pessina, in an earnings call Thursday.
He said the new deal remains true to the strategy behind the original agreement and will be simpler to deliver. Pessina also said the new transaction takes into account issues previously raised by regulators.
Pessina said Walgreens would decide later whether it will sell or close any Rite Aid stores.
Walgreens first announced its intention to acquire Rite Aid in 2015. At the time, the deal was val- ued at about $17.2 billion, including debt.
The combination of Walgreens, the largest U.S. drugstore chain, and Rite Aid would have created a drugstore giant with more than 11,000 stores nationally, even with the sale of more than a thousand stores. That would have been a few thousand more than the nearest competitor, CVS Caremark Corp.
But facing regulatory pushback, Walgreens announced in December 2016 that it would sell 865 Rite Aid stores to Fred’s Pharmacy for $950 million. Then in January, Walgreens slashed its offer for Rite Aid by more than $2 billion.
Fred’s will receive $25 million as reimbursement for expenses of the now-terminated deal.