Walgreens and Rite Aid will sell 865 stores to rival retailer Fred's for $950 million, potentially removing the final roadblock to a tie-up between the nation's largest and third-largest drugstore chains.
Wall Street certainly saw it that way, sending shares of all three companies higher Tuesday.
Walgreens is working to close its $9.4 billion purchase of Rite Aid early next year. It said Tuesday that it's selling the Rite Aid stores in response to concerns raised by federal anti-trust regulators. The deal still needs to be approved by the Federal Trade Commission.
"We are pleased to have found an experienced pharmacy operator for these stores," said Walgreens Boots Alliance Executive Vice Chairman and Chief Executive Officer Stefano Pessina. "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."
Rite Aid Chairman and CEO John Standley said Rite Aid looks "forward to working closely with Fred's to ensure a smooth, successful transition for our customers, patients and associates in the divested stores."
Walgreens Boots Alliance Inc., based in Deerfield, Ill., announced in October 2015 that it planned to buy Rite Aid in a deal that would create about 12,000 U.S. locations. That's several thousand more than the nearest competitor, CVS Health Corp.
The combination is expected to give Walgreens beefed-up negotiating muscle with drugmakers and other suppliers and to help enlarge its presence in the Northeast and in Southern California. But the nation's largest drugstore chain also knew it would have to drop some stores to ease regulatory worry about competition.
Shortly after announcing the deal, Walgreens said it was willing to divest up to 1,000 stores to win regulatory approval, but it expected it wouldn't have to sell more than 500.
Memphis-based Fred's runs 647 general merchandise discount stores clustered mainly in the Southeast, and it operates 371 full-service pharmacy departments within its stores. It also runs three specialty pharmacies.
Walgreens said its purchase agreement requires Fred's to buy additional stores if the FTC requires the divestiture of more than 865.
Shares of Fred's Inc. soared $9.04, or 81.1 percent, to close Tuesday at $20.19. Rite Aid Corp., based in Camp Hill, Pa., rose 5.4 percent, or 44 cents, to $8.61; and Walgreens Boots Alliance, Inc. rose 22 cents, or 0.3 percent, to $86.28.
Business on 12/21/2016