Walgreens no longer buying out Rite Aid
Walgreens announced that it is no longer attempting to purchase drugstore chain Rite Aid and instead has decided to buy half of Rite Aid’s stores for nearly $5.1 billion after antitrust concerns were raised by federal regulators. Wallgreens will own 2,186 stores and three distribution centers that belonged to Rite Aid. This decision puts an end to nearly two years of negotiations. Rite Aid CEO John T. Standley shared his disappointment during a conference call.
“While we’re disappointed that we cannot complete the proposed merger with WBA, we believe that this asset sale is an important strategic transformation for Rite Aid.”
Rite Aid shares fell as much as 30 percent, its steepest since December 2007. The deal’s death leaves the three largest drugstore companies to remain as independent entities. Walgreens would have more than 10,200 U.S. stores, giving the chain opportunities for cost cuts and greater leverage in negotiation with landlords, health-care companies and vendors. CVS has more than 9,600 stores. In January, Walgreens and Rite Aid said they would reduce the price of the proposed sale to as little as $6.8 billion.
This collapsed deal adds to the list of several health care deals that have been derailed by federal regulators. Last January, a federal judge blocked a $37 billion merger between health insurance providers Aetna and Humana. Another attempted merger between Anthem and Cigna was also blocked by a federal judge. Walgreens CEO released a statement following the canceled merger.
“We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders,” Stefano Pessina, Walgreens’ chief executive, said.
Rite Aid will be leaving South Carolina, Utah and Indiana and will only have a pair of stores in Mississippi, Georgia, Alabama, Maine, Rhode Island, West Virginia, Kentucky and Nevada. As part of a new deal made, Rite Aid agreed not to open any new stores in the locations where it’s selling for two years. Rite Aid will also receive a $325 million termination fee relating to the old merger agreement. Rite Aid said the sale of its stores was expected to close within six months.