Walgreens, Rite-Aid Amend & Postpone Merger

DEERFIELD, Ill. — The proposed merger of Walgreens Boots Alliance and Rite Aid Corp. has been pushed back as the two drugstore giants rework their agreement.

The two companies are reducing the price and postponing the close of the pending transaction. Following the announcement, which was triggered after antitrust regulators voiced concern over the advantages the large combined company might have over competitors, Rite Aid shares fell 15 percent on Jan. 30 while Walgreens shares rose 0.3 percent.

As CSNews Online previously reported, Walgreens and Rite Aid reached a deal for Walgreens 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 original purchase price represented a premium of 48 percent to the closing price per share on Oct. 26, the day before the definitive agreement was signed.

Under the new amendment, both drugstore chains agreed to reduce the price to $6.50 to $7 per share for a total transaction value in the range of $6.8 billion to $7.4 billion.

In addition, Deerfield-based Walgreens will now be required to divest up to 1,200 Rite Aid stores — an increase of up to 200 stores over the 1,000 stores that the company had agreed to divest under the terms of the original agreement.

In December, Memphis, Tenn.-based Fred’s Pharmacy made an offer to purchase 865 stores in the eastern and western United States for $950 million in cash.

If the required divestitures fall between 1,000 and 1,200 stores, there will be a pro-rata adjustment of the price per share. The exact price per share will be determined based on the number of required store divestitures, with the price set at $7 per share if 1,000 stores or fewer are required for divestiture and at $6.50 per share if 1,200 stores are required for divestiture.

The drug chains will now extend the merger's closing date to July 31, six months after the originally expected Jan. 27 date.

The transaction is subject to approval by the holders of Camp Hill, Pa.-based Rite Aid's common stock, as well as the expiration and termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

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