Walgreens to Acquire Rite Aid's 4,600 Drugstores

DEERFIELD, Ill. — Merger and acquisition activity is coming to the drugstore channel.

Walgreens Boots Alliance Inc. is set to acquire all outstanding shares of Rite Aid Corp. for $9 per share in cash, for a total enterprise value of approximately $17.2 billion, including acquired net debt.

The purchase price represents a premium of 48 percent to the closing price per share on Oct. 26, the day before the definitive agreement was signed, according to a joint press release from the companies.

Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance, and is expected to initially operate under its existing brand name. Deerfield-based Walgreens Boots Alliance has more than 13,100 stores in 11 countries. Camp Hill, Pa.-based Rite Aid has nearly 4,600 stores in 31 states and Washington, D.C.

The transaction is expected to close in the second half of 2016.

The merger of the two drugstore retailers will bring Walgreens Boots Alliance's differentiated in-store experience for health, wellness and beauty to 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, the companies noted.

"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. 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. health care system," Pessina continued. "Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time."

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 under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.

"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. "This transaction is a testament to the hard work of all our associates to deliver a higher level of care to the patients and communities we serve. 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 transaction is expected to be accretive to Walgreens Boots Alliance's adjusted earnings per share in its first full year after completion. Additionally, Walgreens Boots Alliance expects to realize synergies in excess of $1 billion.

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.