Walgreens, Rite Aid Reduce Deal Price -- 3rd Update
January 30 2017 - 11:21AM
Dow Jones News
By Austen Hufford
Walgreens Boots Alliance Inc. and Rite Aid Corp. agreed to
reduce the amount Walgreens would pay for its rival by at least $2
billion, after the two companies struggled to get antitrust
enforcers to bless the big drugstore deal.
Walgreens in October 2015 agreed to buy Rite Aid for $9 a share,
or about $9.4 billion, in a combination that would result in a
drugstore chain with more than 10,000 U.S. stores.
The companies on Monday agreed to sell up to 200 stores on top
of the 1,000 they originally planned to sell when deal was first
announced. The new agreement would value Rite Aid at between $6.8
billion and $7.4 billion, depending on required store divestitures.
The per-share value of the new deal will range from $7 per share if
1,000 stores or fewer need to be sold, to as low as $6.50 per share
if 1,200 store divestitures are required.
Rite Aid shares dropped 16% in morning trading to $5.81 as
Walgreens shares rose 0.3%.
Antitrust regulators had raised concern that such a big company
could hold too much sway in negotiations with pharmacy-benefits
managers like CVS Health Corp.'s Caremark or Express Scripts
Holding Co., which handle corporate and government drug plans.
Walgreens was the largest drugstore chain in the U.S., with
about 8,200 locations, when it agreed to buy No. 3 Rite Aid and its
nearly 4,600 U.S. stores.
CVS Health, which had about 7,800 locations when the
Walgreens-Rite Aid deal was announced, is also expanding its U.S.
footprint following a deal to buy Target Corp.'s more than 1,600
pharmacies .
Walgreens and Rite Aid, in response to antitrust concerns, said
in December that they would sell 865 stores to Fred's Inc. , a
regional drugstore chain that only had about 650 locations before
the deal was announced.
Both Rite Aid and Walgreens have a major presence in states like
California, New York and Massachusetts, while in others, including
Florida, Texas and Illinois, there isn't any overlap.
At a meeting with investors last week, Walgreens CEO Stefano
Pessina said the companies were discussing "all instruments and
actions" they could put in place to win approval from the Federal
Trade Commission.
Earlier this month, Mr. Pessina said Walgreens had no backup
plan should U.S. antitrust regulators reject the tie-up with Rite
Aid.
"We don't want even to think the deal could not be approved
after so many months," he said.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 30, 2017 11:06 ET (16:06 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
CVS Health (NYSE:CVS)
Historical Stock Chart
From Aug 2024 to Sep 2024
CVS Health (NYSE:CVS)
Historical Stock Chart
From Sep 2023 to Sep 2024