Walgreens & Rite Aid Merger Nearing Completion

DEERFIELD, Ill. — The pending merger between drugstore chains Walgreens Boots Alliance and Rite Aid may close before the end of 2016, according to media reports.

As part of the mandated divestiture of stores to ease antitrust concerns, sources report that Fred's and The Kroger Co. will each take a "substantial" number of locations, as will two or more private equity firms.

In September, Walgreens revealed that it expects to sell between 500 and 1,000 stores to ease antitrust concerns, as CSNews Online previously reported. The company said at the time that it was "actively engaged" with Federal Trade Commission regulators.

Memphis, Tenn.-based Fred's — which operates 650-plus discount general merchandise stores, including 19 franchised locations, primarily in the Southeastern United States — sparked heightened interest in the investor community when its management suggested a "pending transaction" was in the works. At the same time, speculation has centered widely on Cincinnati-based Kroger acquiring hundreds of sites from the drugstore chains that revealed their intention to unite in late October 2015.

Deerfield, Ill.-based Walgreens' acquisition of Camp Hill, Pa.-based Rite Aid is valued at approximately $17.2 billion, including acquired net debt, and would fuse the nation's largest and third-largest drugstore chains. The total number of stores controlled by Walgreens could increase to more than 12,000, and would give the combined company increased negotiating power with drugmakers and suppliers.

Walgreens said it expects to "realize synergies from the acquisition in excess of $1 billion" within four years of closing, by reducing operational and other costs.