Walgreens Boots Alliance Inc. on Tuesday announced a deal to buy Rite Aid Corp., a transaction that would further expand the company's role in the distribution of medications in the U.S.
The companies said the deal includes $9.4 billion in cash and is worth $17.2 billion when debt is included.
The Wall Street Journal first reported a deal was imminent and would be announced as early as today.
Rite Aid shares jumped $2.59, or 43 percent, to close Tuesday at $8.67 in New York, valuing the drugstore chain at $9 billion. The shares had slumped 29 percent since Sept. 16 after the company lowered profit and revenue forecasts for the year, giving Walgreens a potential opportunity to make an offer.
Speculation that Walgreens would pursue Rite Aid arose in March after billionaire Stefano Pessina, who took over in January as interim chief executive officer at Walgreens after it acquired Alliance Boots, said he envisioned doing his next big deal in the U.S.
Rite Aid didn't immediately respond to a phone call seeking comment. A Walgreens spokesman declined to comment.
In addition to expanding its drugstore locations, a Rite Aid deal would give Walgreens its first foray into the business of managing drug benefits for insurers and employers, an area where rival CVS Health Corp. is a leader. Rite Aid entered that business by acquiring Envision Pharmaceutical Services Inc. for about $2 billion this year.
Shares of drug distributor McKesson Corp. dropped 5.8 percent, while AmerisourceBergen Corp., Walgreens' distribution partner for medications, jumped 4.6 percent. Rite Aid represents about $18 billion of McKesson's revenue, according to Evercore ISI.
While Pessina had made clear his appetite for deals, he had been cagey about what kind of acquisition he might pursue. He has said only that the company wanted to participate in what he saw as the inevitable consolidation of the long distribution chain that delivers drugs from manufacturers to patients in the U.S.
Walgreens already has a foothold in the drug-distribution business after it signed a 10-year agreement with AmerisourceBergen in 2013.
Today's Walgreens was built by acquisition. Pessina developed Bern, Switzerland-based Alliance Boots GmbH into a powerhouse through more than three decades of mergers before selling it to Walgreen Co. last year. He's now the company's largest shareholder with a 13 percent stake.
Walgreens is scheduled to report fiscal fourth-quarter results this morning.
Information for this article was contributed by Anna Edney and Cynthia Koons of Bloomberg News and by staff members of The Associated Press.
Business on 10/28/2015