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Walgreens Boots Alliance Inc (NASDAQ: WBA)'s acquisition of Rite Aid Corporation (NYSE: RAD) has come under a cloud of uncertainly following a Bloomberg article, Baird’s Eric W. Coldwell said in a report. He added that the deal was thought of as “highly likely,” Rite Aid’s agreement to divest 865 stores to Fred's, Inc. (NASDAQ: FRED).
Without specifically citing a source, the Bloomberg report mentioned Federal Trade Commission officials were concerned Rite Aid's agreement to sell stores to Fred’s did not “go far enough to preserve competition.” Coldwell pointed out that the purchase agreement stipulated that Fred’s would buy any additional divestitures required by the FTC.
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“However, FTC may also be concerned with Fred’s ability to integrate and operate a much larger pharmacy operation,” Coldwell mentioned. The merger agreement was scheduled to be completed Friday.
Takeaways
The analyst mentioned that Walgreens’ FY 2017 guidance reflected $0.05–$0.12 for a partial year of Rite Aid. “Our model includes $0.06 in FY 2017 (1.2 percent of estimate), $0.33 in FY 2018 (5.7 percent of estimate), and $0.60–$0.70 by year four.”
Coldwell added that the transition of Rite Aid volumes would likely take longer than was earlier anticipated, and “outcomes around who ultimately wins/retains what and when remains cloudy.” He added that the increased uncertainty was “a negative for sector valuation.”
Baird has an Outperform rating on Walgreens.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.