Rite Aid and Walgreens Boots Alliance Renegotiate Sale

Walgreens Boots Alliance Inc and Rite Aid Corp have just secured regulatory clearance for their amended, restated purchase agreement that will allow for Walgreens to buy 1,932 stores as well as three distribution centers and other related inventory from the Rite Aid company for $4.375 billion, in cash.

You may recall that back in June Rite Aid had originally agreed to sell Walgreens Boots Alliance 2,186 stores in addition to their related distribution assets and inventory for $5.175 billion. Obviously there is a substantial difference in this new deal.

In this amended deal, Rite Aid will now retain 250 additional stores over the previous agreement and this will bring down the price a little.  The decision to hold onto a few stores comes only just after Rite Aid and Walgreens Boots Alliance concluded discussions with the United States Federal Trade Commission.

There are stores included in the new agreement are mostly located in either the Northeast or Southeast regions of the United States.  The three distribution centers included in the deal are located in Dayville, CT; Philadelphia, PA; and Spatanburg, SC.  All purchases are expected to begin sometime next month with the aim for completion of the sale by spring of 2018.

Pivotal Research Group senior research analyst Ajay Jain is not surprised by this most recent change, nor by the number of stores renegotiated to preserve the deal. After the original transaction in June Jain noted that he expected the number of stores in the final transaction would have to change because of what he describes as overlap issues.

Jain comments, “With this process taking close to two years to come to a conclusion, we think the final outcome and the structure of the transaction were well anticipated,” adding that he has assessed Walgreens with a “hold” rating.

“However,” he continues, “with each recent iteration of the transaction, the economics appear to be shifting more and more in Walgreens’ favor.”

“We are confident in the path ahead and look forward to working together to shape the future of health care and deliver on the full potential these stores bring to our network,” Walgreens Executive Vice Chairman and CEO Stefano Pessina said in a press release.