Mergers & Acquisitions

A Drugstore Juggernaut in the Making

Walgreens in talks to acquire Rite Aid

UPDATE: Walgreens confirmed the deal late Tuesday. Watch CSP Daily News for details.

Rite Aid Walgreens

DEERFIELD, Ill. -- In a deal that would unite two of the nation’s three largest drugstore chains, but which could draw antitrust scrutiny, Walgreens Boots Alliance Inc. is in advanced talks to buy Rite Aid Corp., The Wall Street Journal reported.

As reported in a 21st Century/CSP Daily News Flash, people familiar with the matter told the newspaper that they expect the companies to announce a deal on Wednesday.

Walgreens, Deerfield, Ill., has more approximately 8,250 drugstores in all 50 states.

Woonsocket, R.I.-based CVS Health has approximately 7,800 CVS and Longs Drugs stores in the United States.

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.

Rite Aid had revenue in the fiscal year ended in February of $26.5 billion. Walgreens had revenue in the 12 months ended in August 2014 of $76.4 billion, while CVS had 2014 sales of $139.4 billion.

Rite Aid currently has a market value of more than $6 billion, meaning that with a typical premium a takeover deal could value the company at close to $10 billion, said the report.

Given their sizes, the deal would be expected to draw scrutiny from antitrust regulators, and big store and other divestitures could be required to win their blessing, the report said. Both companies have big store counts in states like California, New York and Massachusetts, while in others like Florida, Texas and Illinois, there is no overlap.

Walgreens has been on a merger & acquisition trajectory for several years.

In late 2014, Walgreens and international pharmacy group Alliance Boots completed a merger announced in 2012 to form Walgreens Boots Alliance Inc.

In mid-2012, in a deal involving 144 locations, Walgreens acquired the USA Drug, Super D Drug, May's Drug, Med-X and Drug Warehouse chains from Stephen L. LaFrance Holdings Inc., for $438 million.

And in late 2010, Walgreens acquired New York City-based Duane Reade, which operates more than 250 drugstores, for $1.075 billion. The chain continues to operate under that brand.

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.

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