Mergers & Acquisitions

Walgreens-Rite Aid: A Health-Focused Deal

Will health care, wellness strategy at retail ease convenience-channel competitive pressure?

DEERFIELD, Ill. & CAMP HILL, Pa. -- After the news leaked of the deal, Walgreens Boots Alliance Inc. and Rite Aid Corp. officially announced late Tuesday 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.

Walgreens Rite Aid

The companies said they expect the transaction to close in the second half of calendar 2016.

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 combination of Walgreens Boots Alliance and Rite Aid creates a further opportunity to deliver a high-quality retail pharmacy choice for U.S. consumers in an evolving and increasingly personalized health care environment, the companies said.

Walgreens Boots Alliance is highly focused on building a differentiated in-store experience for health, wellness and beauty, and this combination will help accelerate Rite Aid's own efforts toward that end. Once the acquisition closes, Walgreens Boots Alliance plans to further transform Rite Aid's stores to better meet consumer needs.

“Today's announcement is another step in Walgreens Boots Alliance's global development and continues our profitable growth strategy. In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, wellbeing and beauty products and services,” said Walgreens Boots Alliance executive vice chairman and CEO Stefano Pessina. “This combination will further strengthen our commitment to making quality health care accessible to more customers and patients. Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online.”

The health-focused strategy possibly signals fewer traditional competitive pressures for the convenience-store channel.

He continued, “Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. healthcare system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time.”

“Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid's customers while also delivering significant value to our shareholders,” said Rite Aid chairman and CEO John Standley. “Together with Walgreens Boots Alliance, the Rite Aid team can continue to build upon this great work through access to increased capital that will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and wellbeing enterprise.”

The boards of directors of both companies have approved the transaction, which is subject to approval by the holders of Rite Aid's common stock, the expiration or termination of applicable waiting periods and other customary closing conditions.

Walgreens Boots Alliance expects to finance the transaction through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.

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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