Revised Rite Aid deal to give Walgreens 1,932 more stores
CHICAGO — After years of trying, Walgreens Boots Alliance has received clearance from the Federal Trade Commission to expand its business through the purchase of 1,932 Rite Aid stores for $4.4 billion.
The FTC had long resisted a deal between Walgreens and competitor Rite Aid, forcing the two to revise terms of a transaction several times since they proposed their merger in 2015. Originally, Walgreens, based in suburban Chicago, had hoped to buy all of Rite Aid, America’s third-largest drugstore chain, in a deal then valued at $17.2 billion, including debt.
The deal announced Tuesday is smaller than the most recent agreement reached in June, which had Walgreens buying 2,186 Rite Aid stores (about half of Rite Aid’s locations), three distribution centers and other inventory for $5.2 billion. The distribution centers and inventory remain part of the deal. Most of the stores it will buy are in the Northeastern and Southern U.S., and will be converted to Walgreens stores over time.
The transaction could increase Walgreens’ ability to negotiate lower prices on products, which could mean lower prices on some drugs for consumers, said Vishnu Lekraj, a senior analyst with Morningstar. It also lets the chain expand its market share and go into new markets more cheaply than if it had opened its own stores.
The smaller deal was “based on ongoing conversations with the FTC,” said Walgreens spokesman Michael Polzin in an email.
“In the grand scheme of things, we think what they got will help them in the long run,” said John Boylan, a senior equity analyst for Edward Jones.
Walgreens expects to wrap up the store purchases by spring 2018. Asked whether Walgreens plans to close any stores, Polzin said Walgreens will review its new network of stores “with a focus on customer access to convenient care,” and provide more information as decisions are made.
Walgreens had 8,175 stores before the Rite Aid deal, meaning it will have more locations than CVS if it keeps all its current stores and those it is acquiring.