DEERFIELD, Ill., and CAMP HILL, Pa. -- Walgreens Boots Alliance Inc. has secured regulatory clearance for an amended agreement to purchase 1,932 drug stores, three distribution centers and related inventory from Rite Aid Corp. for $4.375 billion in cash and other consideration.
Rite Aid will retain about 250 additional stores as compared to the prior agreement announced between Rite Aid and Walgreens Boots Alliance in June 2017, resulting in a reduction in the transaction sale price. The decision to retain these stores follows discussions between Rite Aid, Walgreens and the U.S. Federal Trade Commission (FTC).
The amended and restated asset purchase agreement replaces the earlier purchase agreement that the companies entered into in June, which included 2,186 stores and related assets for $5.175 billion in cash and other consideration.
The June deal, in turn, replaced the previous $9.4 billion merger agreement with Rite Aid, announced in October 2015 and amended in January 2017, that included an agreement to divest 865 Rite Aid stores to Memphis, Tenn.-based Fred’s Inc., announced in December 2016.
The most recent transaction has been approved by the boards of Rite Aid and Walgreens Boots Alliance and is subject to other customary closing conditions. The companies expect store purchases to begin in October, anticipating them to be completed in spring 2018.
The consideration for the transaction will now be $4.375 billion in cash, the assumption by Walgreens Boots Alliance of the related real-estate leases and the grant of the option to Rite Aid, exercisable through May 2019, to become a member of Walgreens Boots Alliance's group purchasing organization, Walgreens Boots Alliance Development GmbH. Walgreens Boots Alliance will also assume certain limited store-related liabilities as part of the new transaction.
Walgreens plans to convert the stores to the Walgreens brand in phases. The stores are primarily in the northeastern and southern United States, and the three distribution centers are in Philadelphia, Dayville, Conn., and Spartanburg, S.C. Walgreens will not begin the transition of these distribution centers for at least 12 months, it said.
After this deal, Rite Aid will continue to operate about 2,600 drug stores and six distribution centers, as well as EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog.
"With a compelling and more profitable store footprint in key markets, enhanced purchasing capabilities and a stronger balance sheet and improved financial flexibility, we are well-positioned to implement our plans to deliver improved results," said Rite Aid Chairman and CEO John Standley.
Rite Aid, Camp Hill, Pa., operates more than 4,500 drug stores in 31 states and the District of Columbia with fiscal 2017 annual revenues of $32.8 billion.
Walgreens Boots Alliance, Deerfield, Ill., is a global pharmacy-led, health and well-being enterprise created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two companies with complementary geographic footprints. It has more than 13,200 stores in 11 countries. The company's portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as health and beauty product brands such as No7, Botanics, Liz Earle and Soap & Glory.