Tuesday, January 31, 2017
Associated Press
Walgreens substantially lowered its offering price for drugstore rival Rite Aid and, facing resistance from U.S. regulators, raised the number of stores it would be willing to unload to ease monopoly concerns.
The companies initially expected to sell no more than 500 stores, but that was pushed to 1,200 under the new terms announced Monday.
The new offer for Rite Aid is between $6.50 and $7 per share, depending on how many stores need to be divested. When the deal was first announced in late 2015, Walgreens bid $9 per share, roughly $9.4 billion, for the nation’s third-largest drugstore chain.
The lower price range would cut the deal’s new value to between $6.84 billion and $7.36 billion, based on Rite Aid’s roughly 1.05 billion outstanding shares.
The deadline to complete the deal, which had already been extended once and expired last week, was pushed back to the end of July.
Shares of Rite Aid Corp. tumbled more than 17 percent to $5.74 in midday trading Monday.
The combination of Walgreens and Rite Aid would create a drugstore giant with more than 11,000 stores nationally, even with the sale of more than a thousand stores. That’s a few thousand more than nearest competitor, CVS Caremark Crop.
Rite Aid, based in Camp Hill, Pa., runs nearly 4,600 drugstores. The addition of its locations is expected to give Walgreens more negotiating muscle with drugmakers and other suppliers and to grow its presence in the Northeast and Southern California.
Walgreens also has a sizable overseas presence, especially in the United Kingdom. It currently runs more than 13,000 stores in 11 countries, including 8,175 in the United States.
Walgreens said last December – more than a year after announcing the Rite Aid deal – that it would sell 865 stores to rival retailer Fred’s for $950 million due to concerns raised by federal anti-trust regulators.
A Walgreens spokesman said Monday that the company still has an existing deal with Fred’s, but he declined to comment on whether that company had agreed to buy more stores or if another potential buyer had emerged.