MEMPHIS, Tenn. -- Drug store retailer Fred’s Inc. has announced that it has signed an agreement with Walgreens Boots Alliance Inc. and Rite Aid Corp. to purchase 865 stores and other assets in the eastern and western United States for $950 million in cash.
“With this agreement, we are moving ahead with important work necessary to obtain approval of our acquisition of Rite Aid,” said Walgreens Boots Alliance Executive Vice Chairman and CEO Stefano Pessina.
The companies are divesting these stores and entering into the deal with Fred’s to respond to Federal Trade Commission (FTC) concerns in its review of the proposed acquisition of Rite Aid by Walgreens Boots Alliance, announced in October 2015.
The companies expect the closing of the transaction to take several months after Walgreens Boots Alliance completes the acquisition of Rite Aid. It is subject to approval by the FTC as well as customary regulatory approvals and closing conditions. Shareholder approval is not required.
Fred’s said the transaction, if approved, should close during the first half of 2017 and will position Fred’s Pharmacy as the third-largest drugstore chain in the United States and create a new national competitor.
In connection with this transaction, the company has received financing commitments to fund the purchase price, transaction-related costs, ongoing business operations and anticipated capital investments.
“This will be a transformative event for Fred’s Pharmacy that will accelerate our healthcare growth strategy through our acquisition of 865 new stores located in highly attractive markets,” said Michael Bloom, CEO of Memphis, Tenn.-based Fred’s Pharmacy.
“We have been working for several months on integration plans to ensure a seamless transition for Rite Aid customers, patients, team members and supplier partners by leveraging our world-class senior leadership team’s significant expertise in managing major healthcare acquisitions and integrations,” he said. “We assembled this highly experienced team in 2015, implemented upgrades to our infrastructure in 2016, and now, in 2017, we look forward to the continued optimization of our business, fueled by today’s milestone announcement. We believe the purchase of these stores will not only complement recent investments in our team members, processes and technological infrastructure, but also positively impact our business and maximize shareholder value.”
The 865 stores are generally representative of Rite Aid’s pre-divesture store performance, said the company.
Fred’s Pharmacy will continue to employ store and certain field and regional team members related to the operations of the acquired stores. Upon completion of the acquisition, the company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.
Deerfield, Ill.-based Walgreens Boots Alliance has more than 13,200 drug stores in 11 countries. Its portfolio includes Walgreens, Duane Reade, Boots and Alliance Healthcare.
Camp Hill, Pa.-based Rite Aid is one of the nation’s leading drug store chains, with nearly 4,600 stores in 31 states and the District of Columbia.
Fred’s Pharmacy and its subsidiaries operate 647 discount general-merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 18 franchised locations.
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