The Walgreens-Rite Aid merger has fallen apart.
Walgreens has called off its planned takeover of Rite Aid. Instead, the two have entered a new agreement through which Walgreens will pay $5.175 billion to buy 2,186 Rite Aid stores, three distribution centers and related inventory. After the new transaction closes, Walgreens will start acquiring Rite Aid stores over a six-month period.
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In a statement, Walgreens CEO Stefano Pessina highlighted the strengths of the revised agreement:
It will allow us to expand and optimize our retail pharmacy network in key markets in the U.S., including the Northeast, and provide customers and patients with greater access to convenient, affordable care. We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders.
Those competitive concerns raised by regulators are likely what led to the end of the original deal in the first place.
The merger was initially announced in 2015. A December 2016 change to the agreement included selling certain Rite Aid stores to Fred’s Inc., according to Bloomberg.
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Despite this alteration, the FTC was wary about how the pending deal would harm competition in the market.
The termination of the original agreement leaves a few losers. Walgreens will pay Rite Aid a $325 million termination fee for the failed deal. And Fred’s won’t receive the divested stores.
“This is a disappointing outcome; however, the termination of the transaction has no impact on the company’s transformation strategy or our ability to execute,” Fred’s CEO Michael Bloom said in a statement.
Photo: Kuzma, Getty Images
