Will FTC OK New Walgreens Rite Aid Merger Conditions?

Walgreens Boots Alliance has been on a spree lately, trying to expand and scoop up what other smaller companies it can. You may recall its merger with Alliance Boots only two years ago, for example. But they company has not had success in acquiring industry competitor Rite Aid. Recently, though, the US government has denied Walgreen’s attempt to acquire Rite Aid but that may be changing.

Apparently, the trans-Atlantic drug store operator has a new plan: sell at least 865 Rite Stores to the small regional drugstore chain known as Fred’s for $950 million in cash. In addition, though, WBA also argues that if the FTC demands an even greater divestiture, Fred’s will likely be compelled enough to buy more.

This is WBA’s plan to get the FTC to ok their $9 billion acquisition deal of Rite Aid.

Now, if WBA gets the green light for this from the FTC, the move would actually make the Fred’s drugstore chain one of the biggest pharmacy chains in the United States—literally overnight. Of course, Walgreens still sees this as a plus because it would mean it had just soaked up its biggest competitor.

Now, investors are apt to ok this move. On word of this strategy, for example, shares of Fred’s skyrocketed more than 55 percent—to reach $17.31—in morning trading, alone. In addition, even Rite Aid shares jumped, though admittedly less, by 5.81% to $8.65. Walgreens showed only a modest uptick of of .94%, to reach $86.87 per share.

Walgreens Boots Alliance CEO Stefano Pessina notes, “We are pleased to have found an experienced pharmacy operator for these stores. With this agreement, we are moving ahead with important work necessary to obtain approval of our acquisition of Rite Aid. We look forward to continuing to provide our customers and patients with the highest level of care and attention.”

Furthermore, Fred’s pharmacy Ceo Michael Bloom notes, “We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members.”
Indeed, Fred’s, again, will become a bigger household name across the United States almost overnight. But Walgreens says they will benefit from this deal too: by saving more than $1 billion in just the first three years of the merger.