Walgreens, Rite Aid Reduce Deal Price -- 2nd Update
January 30 2017 - 10:22AM
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.
The companies, in response to those concerns, said in December
that they would sell 865 stores to Fred's Inc. , a regional
drugstore chain.
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.
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.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
January 30, 2017 10:07 ET (15:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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