DEERFIELD, Ill. -- Walgreens Boots Alliance Inc. may have to divest up to 1,000 retail drugstores to successfully acquire Rite Aid Corp., according to documents filed with the U.S. Securities & Exchange Commission (SEC).
The companies announced October 27 that they have entered into an agreement under which Walgreens will acquire all outstanding shares of Rite Aid for $9 per share in cash, for a total enterprise value of approximately $17.2 billion, including acquired net debt.
Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance; it will operate initially operate under its existing brand name.
The agreement contains specified termination rights, including a mutual termination right in the event that the merger is not consummated by Oct. 27, 2016, subject to extension to Jan. 27, 2017.
Rite Aid must pay Walgreens a $325-million breakup fee if it terminates the transaction following a change of recommendation for the deal by Rite Aid’s board of directors or if Rite Aid terminates the deal to enter into a definitive agreement with a third party with respect to a "superior proposal," according to the filing. Rite Aid must also pay Walgreens a $325-million breakup fee if the agreement is terminated under certain circumstances while an alternative acquisition proposal has been made publicly or communicated to the board and not withdrawn and, within 12 months following such termination, Rite Aid enters into or consummates an similar agreement. Also, upon termination of the agreement under certain circumstances, Rite Aid will be required to pay Walgreens up to $45 million for expenses.
In the event Walgreens terminates the agreement because of a failure to obtain the required regulatory approvals, it is required to pay Rite Aid a $325-million breakup fee, which will be increased to $650 million if Walgreens enters into, consummates or announces certain acquisitions within eight to 12 months of the date of the agreement.
Camp Hill, Pa.-based Rite Aid is one of the nation's leading drugstore chains with nearly 4,600 stores in 31 states and the District of Columbia and fiscal 2015 annual revenues of $26.5 billion.
Deerfield, Ill.-based Walgreens, the nation's largest drugstore chain, is the Retail Pharmacy USA Division of Walgreens Boots Alliance Inc. It operates approximately 8,240 drugstores with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. It is the first global pharmacy-led, health and wellbeing enterprise, created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two leading companies with major brands, complementary geographic footprints and a heritage of trusted health care services through pharmaceutical wholesaling and community pharmacy care. It has more than 13,100 stores in 11 countries. The company includes one of the largest global pharmaceutical wholesale and distribution networks with more than 350 distribution centers delivering to more than 200,000 pharmacies, doctors, health centers and hospitals each year in 19 countries. In addition, Walgreens Boots Alliance is one of the world's largest purchasers of prescription drugs and many other health and wellbeing products.
Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Botanics, Liz Earle and Soap & Glory.
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