Walgreens, Boots Alliance and Rite Aid terminated their $9.4 billion merger agreement, amid heavy anti-trust concerns, and unveiled on Thursday a new deal to buy more than 2,000 of Rite Aids stores for $5.2bn. RAD shares tumbled as much as 20% on the news.
The decision to halt the original deal, which was announced in October 2015, came after “feedback” from the US Federal Trade Commission that “led the company to believe that the parties would not have obtained FTC clearance to consummate the merger”. As the WSJ notes, investors had been awaiting a government decision on whether the delayed tie-up between the drugstore chains would go through and had grown increasingly uneasy that the deal could fall apart.
Instead of pursuing what appeared to be a doomed merger, Walgreens will instead acquire 2,186 stores and related assets for $5.2bn. According to the FT, Rite Aid operates a total of 4,523 stores at the end of the first quarter.
“While we believe that pursuing the merger with [Walgreens] was the right thing to do for our investors and customers, this new agreement provides a clear path forward,” said Rite Aid chief executive John Standley.
With the merger halted, a related deal in which Fred’s, a retailer, was to buy 865 stores from Walgreens and Rite Aid was also ended. Fred shares also tumbled