In its fourth attempt, Walgreens Boots Alliance clinched regulatory approval for a deal to buy Rite Aid Corp. stores after a last-minute reduction of the number of stores and price.
The drugstore chain said that it secured clearance for a revised deal, under which it will buy 1,932 Rite Aid stores for $4.38 billion. That’s about 250 fewer stores than under a previous proposal, which totalled $5.18 billion.
The deal, once completed, will be a hard-won victory for Walgreens CEO Stefano Pessina, who has pushed for a transaction that could clear regulatory approval since the fall of 2015. The modified agreement, while reduced, will still enable Walgreens to dramatically expand its footprint and become a more powerful competitor for CVS Health Corp. With the addition of the Rite Aid stores, Walgreens will have about 10,000 locations in the US.
Store purchases are expected to begin in October and be completed in the spring of 2018, Walgreens said. Most of them are in the north-east and southern US, the company said.
Walgreens initially proposed a takeover of Rite Aid in October 2015, for $9 a share, or $9.4 billion. That deal ran into roadblocks at the FTC, and in January, Walgreens and Rite Aid recut the deal in an attempt to resolve the agency’s concerns that the combination would hurt competition.
A revamped merger plan called for selling up to 1,200 Rite Aid locations to another buyer to satisfy the FTC and was worth at least $2 billion less to Rite Aid shareholders. That approach, which could have cost Walgreens as much as $7.37 billion, again failed to win over the regulator, and Walgreens terminated the plan in June.
The company said that, instead, it would pay $5.18 billion to acquire 2,186 stores, leaving a slimmed-down Rite Aid as a stand-alone company, but that still wasn’t enough to satisfy the FTC. The final version of the deal that was announced has about 12% fewer stores and a lower price.