US: Walgreens May Have To Sell More Stores To Gain Clearance For Rite Aid Deal

Walgreens Boots Alliance said yesterday that it may have to sell more stores than its previous estimate to win regulatory approval for its planned $9.4bn acquisition of rival Rite Aid, which was announced last October.

The group said it remained “actively engaged” with the Federal Trade Commission (FTC) regarding its review of the pending acquisition. WBA added that as a result of progress made in the talks, it was now exploring potential divestiture remedies to address certain issues raised by the FTC.

In order to expedite the process, WBA said it now expects that the most likely outcome will be that both parties will be required to divest more than the 500 stores previously communicated, but still expects fewer than 1,000 stores will be required to be sold.

The company added that it still continues to believe that the acquisition will close in the second half of this year, and that despite the store divestitures, the acquisition will be accretive to its earnings in the first full year after closing of the transaction.

The company also expects that it will still realise synergies from the acquisition in excess of $1bn, to be fully realized within three to four years of closing the deal.

WBA currently operates around 8,200 Walgreens stores in the US, whilst Rite Aid has 4,500. Even a divestiture of up to 1,000 stores would make Walgreens far larger than CVS and its 9,600 pharmacy outlets.

NAM Implications:
  • This is too big a deal for WBA to allow the sale of even 1,000 outlets to stand in the way…
  • Think ahead to WBA being 12,000 outlets compared with CVS and its 9,600 pharmacy outlets…
  • And prepare now to secure your fair share of the potential….