Market Overview

Fred's Will Acquire Nearly 900 Rite Aid Stores In $950 Million Deal

Fred's Will Acquire Nearly 900 Rite Aid Stores In $950 Million Deal

Walgreens Boots Alliance Inc (NASDAQ: WBA)'s proposed acquisition of smaller rival Rite Aid Corporation (NYSE: RAD) stood little chance of receiving regulatory approval unless the companies were to divest hundreds of Rite Aid stores to ease competitive concerns.

Walgreens and Rite Aid were said to be in talks with private equity groups, the grocery store chain Kroger Co (NYSE: KR) and even rival CVS Health Corp (NYSE: CVS) to sell hundreds of properties.

The talks ultimately failed and investors started to doubt if a buyer even exists whose business can support the addition of hundreds of new locations. Nevertheless, Walgreens management remained confident that it could pull off a deal, which would ultimately lead to the merger finalizing in 2017.

Buyer Found And Confirmed

Rite Aid's stock rose more than 6 percent Tuesday after Fred's, Inc. (NASDAQ: FRED) and its subsidiary Fred's Pharmacy, agreed to purchase 865 stores and certain assets from Walgreens and Rite Aid in a deal valued at $950 million.

The purchase will transition to Fred's Pharmacy to become the third-largest drugstore chain in the U.S. and result in a new national competitor. The transaction remains subject to approval by the Federal Trade Commission and is targeted to be closed in the first half of 2017.

Fred's Pharmacy Chief Executive Officer Michael K. Bloom, commented, "This will be a transformative event for Fred's Pharmacy that will accelerate our healthcare growth strategy through our acquisition of 865 new stores located in highly attractive markets. We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members. We look forward to realizing the considerable benefits this transaction will bring to our customers, patients, payors, supplier partners, team members and shareholders."

Image: Mike Mozart, Flickr

Posted-In: Walgreens Walgreens Rite Aid MergerM&A News Movers Best of Benzinga


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