Walgreens to Expand Drugstore Empire in $9.4 Billion Deal
Walgreens Boots Alliance agreed to acquire Rite Aid Corp. for about $9.4 billion in cash in a transaction to further expand the company’s role in the distribution of medications in the US
The Rite Aid deal, announced Tuesday, would combine the second- and third-largest drugstore chains in the US, with a total of about 12,800 locations, helping Walgreens vault past market leader CVS Health. The acquisition will add to Walgreens’ earnings beginning a full year after completion and will produce more than $1 billion in savings from cost overlaps, the companies said Tuesday in a statement. Including debt, the deal is valued at $17.2 billion, they said.
The company also reported fiscal fourth-quarter earnings that showed how it reaps cost savings from mergers. Walgreens said it has saved $799 million in fiscal 2015 after combining with Alliance Boots last year.
The deal creates financial savings but does little to change the drugstore chain’s strategic position in the rapidly evolving health-care industry, Barclays analyst Meredith Adler said in a note Tuesday.
Walgreens also reported fiscal fourth-quarter earnings Wednesday that beat analysts’ estimates. Excluding one-time items, earnings were 88 cents a share, beating the 81-cent average of analysts’ estimates compiled by Bloomberg. Walgreens’ pharmacies filled 222 million prescriptions in the quarter, up 4.6 per cent from a year before.
Profit margins fell from the prior quarter in the US retail pharmacy business, and same-store retail sales growth from a year earlier slowed to 0.4 per cent.
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