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Mergers & Acquisitions

Who Will Pick Up What Walgreens Divests?

Drug chain narrows store range for Rite Aid deal as potential suitors emerge

DEERFIELD, Ill. -- To alleviate antitrust concerns over the pending $17. 2 billion acquisition of Rite Aid Corp., Walgreens Boots Alliance Inc. said it is “exploring potential divestiture remedies” for the drug chain’s stores. At the same time, media reports indicate that Kroger may be interested in acquiring some of the divested units.

Walgreens and Rite Aid are “actively engaged with the Federal Trade Commission (FTC) regarding its review of the pending acquisition,” Walgreens Boots Alliance said in an update on the acquisition’s progress.

“Walgreens Boots Alliance now expects that the most likely outcome will be that the parties will be required to divest more than the 500 stores previously communicated, but still continues to expect that fewer than 1,000 stores will be required to be divested,” the drug chain said. “In addition, the company continues to believe that the acquisition will 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, but it will operate initially under its existing brand name.

The company continues to expect that it will realize synergies from the acquisition in excess of $1 billion, to be fully realized within three to four years of closing.

Potential Store Suitors

Kroger was rumored to be a potential buyer of Rite Aid more than a year ago, reported the Cincinnati Business Courier.

Kroger is primarily a grocery-store chain, but it’s also the nation’s fifth-largest pharmacy operator and a major convenience-store operator. It has approximately 2,200 in-store pharmacies and approximately 800 c-stores.

An acquisition of some of the Walgreens and Rite Aid stores would boost its pharmacy business, said the report. It could also use the sites and surrounding real estate to build supermarkets. It could even use some sites to open smaller urban supermarkets, a trend Kroger has been capitalizing on recently.

Camp Hill, Pa.-based Rite Aid has nearly 4,600 drug stores in 31 states and the District of Columbia.

Deerfield, Ill.-based Walgreens Boots Alliance, a global, pharmacy-led health and well-being enterprise, was created through the combination of Walgreens and Alliance Boots in December 2014, bringing together two drug store companies with major brands and complementary geographic footprints. The company has more than 13,100 drug stores in all 50 states and in 11 countries. Its 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.

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