Wal­greens ends takeover ef­fort of Rite Aid, will buy 2,186 stores

The Detroit News - - Front Page - Associated Press

New York — Wal­greens has ended its takeover pur­suit of ri­val Rite Aid fol­low­ing re­sis­tance from U.S. reg­u­la­tors and will in­stead now buy stores, distri­bu­tion cen­ters and in­ven­tory in a new deal.

The pro­posed merger, first an­nounced in 2015, was ini­tially for about $9.4 bil­lion but was whit­tled down to about $6.8 bil­lion ear­lier this year.

For scrap­ping the trans­ac­tion, Wal­greens Boots Al­liance will pay Rite Aid Corp. a $325 mil­lion ter­mi­na­tion fee. It will pay Fred’s Phar­macy an ad­di­tional $25 mil­lion fol­low­ing the ter­mi­na­tion of a re­lated as­set deal.

Un­der the new agree­ment, Wal­greens will buy 2,186 stores, three distri­bu­tion cen­ters and re­lated in­ven­tory from Rite Aid for ap­prox­i­mately $5.18 bil­lion in cash. Wal­greens will also as­sume the re­lated real es­tate leases and cer­tain lim­ited store-re­lated li­a­bil­i­ties. Rite Aid will have an op­tion, ex­er­cis­able through May 2019, to be­come a mem­ber of Wal­green’s group pur­chas­ing or­ga­ni­za­tion.

Wal­greens said Thurs­day that the stores it pur­chases from Rite Aid will be con­verted to the Wal­greens brand “over time.” The stores in­cluded in the agree­ment are mostly lo­cated in the North­east, Mid-At­lantic and South­east. The three distri­bu­tion cen­ters are in Dayville, Con­necti­cut, Philadel­phia and Spar­tan­burg, South Carolina.

The new trans­ac­tion is tar­geted to close within the next six months.

Prior to the new deal, Deer­field, Illi­nois-based Wal­greens and Camp Hill, Penn­syl­va­ni­abased Rite Aid faced a com­pli­cated task of eas­ing an­titrust con­cerns to com­plete the buy­out. The com­pa­nies ini­tially ex­pected to sell no more than 500 stores to ap­pease reg­u­la­tors, but that was even­tu­ally pushed to 1,200 stores.

The com­bi­na­tion of Wal­greens, the largest U.S. drug­store, 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.

Mean­while, Wal­greens re­ported a 5.3 per­cent boost in fis­cal third-quar­ter profit to$1.16 bil­lion, or $1.07 per share. Earn­ings, ad­justed for one-time gains and costs, were $1.33 per share.

Rev­enue rose 2.1 per­cent to $30.1 bil­lion.

The re­sults ex­ceeded Wall Street ex­pec­ta­tions. An­a­lysts sur­veyed by Zacks In­vest­ment Re­search were look­ing for earn­ings of $1.31 per share on $29.68 bil­lion in rev­enue.

Rite Aid re­ported a firstquar­ter ad­justed loss of 5 cents per share on rev­enue of $7.78 bil­lion.

Shares of Rite Aid plunged more than 22 per­cent in pre­mar­ket trad­ing, while Fred’s stock tum­bled nearly 20 per­cent. Shares of Wal­greens were up 6.5 per­cent.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.