The development that grabbed all the headlines was WBA’s agreement to purchase 2,186 drug stores, three distribution centers and related inventory from Rite Aid for $5.175 billion in cash. The deal supersedes the two companies’ earlier plans to merge, a transaction that prompted the longest review in Federal Trade Commission history and, as the July 7 deadline for government action approached, was widely expected to be blocked on antitrust grounds.
Rather than undertake a lengthy legal battle where the prospects of prevailing were uncertain at best, Stefano Pessina, WBA’s vice chairman and chief executive officer, changed course. Putting an end to WBA’s 18-month quest to take control of Rite Aid, he found a way, pending government approval, to obtain most of what he wanted via an asset sale. The deal will significantly strengthen the presence of the Walgreens drug chain in the Northeast, Southeast and Mid-Atlantic states, and move it ahead of archrival CVS Pharmacy for the lead in U.S. drug store count.
Throughout the many ups and downs of WBA’s attempt to acquire Rite Aid, Pessina has exhibited the patience, persistence and adaptability in pursuit of his vision that have enabled him to build a global empire in pharmacy and drug wholesaling. Pessina expressed satisfaction with the most recent turn of events during a conference call about WBA’s third quarter earnings.
“Overall, I view this deal as being more attractive than the transaction it replaces, recognizing the adjustments and compromises that we have had to make since the original deal was announced in what continues to be a challenging market for pharmacy. … The stores we are proposing to purchase are more than enough to create the potential opportunity for optimization of our expanded network.
“I’m pleased to have, once again, been proved right in my firm belief that, as the English say, where there is a will, there is a way, that two willing partners can, despite adversity, find a deal that delivers true benefits for both.”
Less widely noted than the new Rite Aid deal, but just as sure an indication of where the pharmacy business is headed, is the partnership Walgreens struck with LabCorp, a leading provider of clinical laboratory and drug development services, under which the latter will establish patient service centers in selected Walgreens stores. The facilities, seven of which are slated to open this year (five in Greater Denver; one in Morrisville, N.C.; and one in Deerfield, Ill., where WBA is headquartered) will be located near the pharmacy and provide a conducive environment for specimen collection.
The collaboration represents another step forward in the industrywide transformation of the drug store into a true community health center. Like many of its competitors, Walgreens already houses walk-in health clinics in many of its outlets, and it is experimenting with vision care. The addition of lab services is a logical extension of the drive to tap the latent potential of the nation’s retail pharmacy network to provide accessible, affordable health care. Pessina is determined to keep WBA in the vanguard of that movement, and, with its substantially growing store base, the company will be in an even better position to work with patients, payers and other health care providers to improve health outcomes.