Walgreens, Rite Aid Cut Price for Merger -- Update
January 30 2017 - 09:43AM
Dow Jones News
By Austen Hufford
Walgreens Boots Alliance Inc. said it would pay less to buy Rite
Aid Corp., cutting at least $2.1 billion off the price tag of the
deal as it remains under fire from antitrust regulators.
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.
Monday, the companies said they had reached a new deal that
would value the company 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 $6.50 to $7 a share.
Rite Aid shares dropped 15% in premarket trading to $5.88 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.
The companies, in response to those concerns, said in December
that they would sell 865 stores to Fred's Inc. , a regional
drugstore chain. The original deal expired Jan. 27. The new deal
expires at the end of July.
Walgreens said it could divest up to 1,200 Rite Aid stores and
if required to obtain regulatory approval. The exact price per
share will be determined based on the number of required store
divestitures, with the price ranging from $7 per share if 1,000
stores or fewer are required to be sold, to as low as $6.50 per
share if 1,200 stores are required.
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 09:28 ET (14:28 GMT)
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