What the Rite Aid deal means for Walgreens

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What the Rite Aid deal means for Walgreens

By Gina Acosta - 09/19/2017

Walgreens Boots Alliance is poised to become the largest drug chain in the United States after receiving regulatory approval to purchase 1,932 Rite Aid stores, three distribution centers and related inventory for $4.375 billion in cash.  

The deal, which will leave Rite Aid with about 2,600 stores, marks the end of a two-year fight for Walgreens, which initially tried to buy Rite Aid outright for $17 billion in October 2015.

The agreement was reworked several times over the past few years as Walgreens scaled back the number of stores it intended to purchase. In June, the company tried for a $5.2 billion deal that would have handed it 2,186 Rite Aid stores.

Walgreens will assume certain limited-store liabilities in the transaction, the related leases and give Rite Aid the option to become a member of the Walgreens Boots Alliance's group purchasing organization, which Rite Aid can exercise through May 2019, according to The Wall Street Journal.

After the stores are acquired, they are expected to be converted to the Walgreens banner.

The deal is not expected to impact adjusted earnings per share in the fiscal year ending August 2018. The company expects synergies of more than $300 million, fully realized within four years of the initial closing.