Walgreens has ended its takeover pursuit of rival Rite Aid following resistance from U.S. regulators and will instead now buy stores, distribution centers and inventory in a new deal. The Associated Press reports the proposed merger, first announced in 2015, was initially for about $9.4 billion but was whittled down to about $6.8 billion earlier this year.
Prior to the new deal, Illinois-based Walgreens Boots Alliance and Pennsylvania-based Rite Aid Corp. faced a complicated task of easing antitrust concerns to complete the buyout. The companies initially expected to sell no more than 500 stores to appease regulators, but that was eventually pushed to 1,200 stores.
The combination of Walgreens, the largest U.S. drugstore, and Rite Aid would have created a drugstore giant with more than 11,000 stores nationally, even with the sale of more than a thousand stores. That would have been a few thousand more than the nearest competitor, CVS Caremark Corp.
For scrapping the transaction, Walgreens will pay Rite Aid a $325 million termination fee. It will pay Fred’s Pharmacy, which agreed to buy 856 Rite Aid stores, an additional $25 million following the termination of a related asset deal.
Under the new agreement, Walgreens will buy 2,186 stores, three distribution centers and related inventory from Rite Aid for approximately $5.18 billion in cash. The stores included in the agreement are mostly located in the Northeast, Mid-Atlantic and Southeast. The three distribution centers are in Connecticut, Pennsylvania and South Carolina. The new transaction is targeted to close in the next six months.
