Chicago Tribune
CHICAGO — Walgreens Boots Alliance and Rite Aid are revising their proposed merger, slashing more than $2 billion from the purchase price and pushing the closing date back six months while they await regulatory approval.
The tentative deal, which was supposed to close Friday, is now scheduled to close July 31 to give the companies more time to get the thumbs-up from the Federal Trade Commission.
The deal, previously valued at $17.2 billion, including debt, is now valued at between $14 billion and $14.6 billion, said Walgreens spokesman Michael Polzin.
Walgreens, headquartered in suburban Chicago, now will pay $6.50 to $7 a share for Rite Aid common stock, depending on how many Rite Aid stores must be divested. That’s down from the $9 a share Walgreens originally agreed to pay.
Walgreens now will pay $7 a share if 1,000 or fewer stores have to be sold, and $6.50 a share if 1,200 stores must be sold.
The new price reflects the additional stores that might have to be sold, Polzin said in an email. Walgreens earlier expected it might only have to sell about 500 stores.
Walgreens announced in December that it would sell 865 Rite Aid stores to Fred’s Pharmacy for $950 million to address FTC concerns about the deal. But Bloomberg News, citing unnamed sources, reported this month that those divestitures hadn’t satisfied the FTC.
A spokeswoman for the FTC declined to comment Monday.
Polzin said the deal with Fred’s remains in place. He declined to comment on to whom Walgreens might sell the additional Rite Aid stores.
It’s likely, however, that Walgreens will try to sell those stores to Fred’s as well, said Joseph Agnese, a senior equity analyst with CFRA Research. An attempt to reach Fred’s for comment Monday was not immediately successful.
Agnese said Monday’s announcement shows Walgreens is committed to completing the deal with Rite Aid, headquartered in Camp Hill, Pa. Drugstores are under financial pressure as government insurance programs such as Medicare and Medicaid cut drug reimbursements, and Walgreens likely is looking to grow to help offset that pressure, he said.
“I think Walgreens is highly motivated to get the deal done, so I think they’re going to do what they can to achieve that goal this year,” Agnese said.
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