Industry Expert: Walgreens-Rite Aid M&A Only The Beginning
- Walgreens Boots Alliance Inc (NASDAQ: WBA) on Tuesday said it will acquire rival Rite Aid Corporation (NYSE: RAD) for $17.2 billion.
- Virginia Morris, a strategic initiatives expert at Daymon Worldwide, sees further consolidation in the drugstore and retail segment.
- She added that companies feel it is necessary to merge in order to "stand out or to stay alive."
The proposed transaction would mark Walgreens' second large acquisition since 2014. The company said last August it will pay $15.3 billion to acquire the remaining stake it didn't already own in Alliance Boots, a European-based drug store.
Speaking to Benzinga, Virginia Morris, Vice President of Global Consumer & Innovation Strategy at Daymon Worldwide said that Walgreens (along with CVS Health Corp (NYSE: CVS)) have increased their U.S. footprint as a result of M&A activity which "opened up additional scale synergies."
Morris said traditional mid-market retailers "need to join forces to build scale and steal share." She added that the combined Walgreens Boots Alliance-Rite Aid entity will continue offering value to the customer base with their "consumer-centric" private brand program.
"Both retailers have been very successful in creating unique offerings to meet their consumer needs," Morris said.
Morris also suggested that segments that have not seen heavy consolidation far likely will. She pointed out the convenience store, sporting goods, grocery, and pet segments are ripe to see consolidation given the continued pressure from online retailers. She also argued that consumers "have too many choices" and "less loyal" and M&A activity is vital for companies to join forces in order to "stand out or to stay alive."
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