Walgreens wins approval for Rite Aid deal

Walgreens clinched regulatory approval for a deal to buy Rite Aid stores after a last-minute reduction of the number of stores and price, a hard-fought victory following two years of failed attempts.

The drugstore chain gained clearance from the U.S. Federal Trade Commission on its fourth try, but still drew criticism from one of the two commissioners currently on the short-staffed agency, who raised concerns that the deal will reduce competition and lead to rising prices for generic drugs.

Under the new agreement, announced Tuesday, Walgreens will buy 1,932 Rite Aid stores for $4.38 billion, becoming a bigger competitor to CVS. That’s about 250 fewer stores than under a previous proposal, which totaled $5.18 billion.

Walgreens Chief Executive Officer Stefano Pessina, who had pushed for a transaction since the fall of 2015, said he was surprised by the roadblocks he faced over the lengthy negotiations with regulators.

“We have been a little surprised by the difficulties that we have found and by the length of the process” in getting the deal approved, Pessina said in an interview on Bloomberg Television. “We had to change completely the structure of the deal” when it became clear the FTC was not going to accept an outright acquisition of Rite Aid, the CEO said.

The modified agreement, while reduced, will still enable Walgreens to edge past CVS to become the largest U.S. pharmacy chain by number of stores.

Rite Aid shares closed down 12 percent to $2.40, the most since June 29, when Walgreens abandoned an earlier plan to buy Rite Aid outright. Walgreens fell 1.7 percent to $81.21.

The deal is proceeding despite a disagreement between FTC Acting Chairman Maureen Ohlhausen and Commissioner Terrell McSweeny about whether to open an in-depth investigation into the transaction as a 30-day review deadline was set to expire.

McSweeny, a Democrat, disagreed with the decision to clear the deal without a second request. The acquisition eliminates Rite Aid’s footprint across much of the country, which may force it to pay more for generic pharmaceuticals and raise prices for drugs, she said in a statement.

The store purchases are expected to begin in October and be completed in the spring of 2018, Walgreens said.