Final deal includes 254 fewer stores than the June offer

DEERFIELD, Ill. — Walgreens Boots Alliance Inc. (WBA) announced today that it has secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid Corp. for $4.375 billion in cash and other consideration.

The amended and restated purchase agreement between the parties updates the terms of the agreement with Rite Aid that was announced in June. The transaction has been approved by the boards of directors of Rite Aid and WBA and is subject to customary closing conditions. Store purchases are expected to begin in October, with completion anticipated in spring 2018.

The consideration for the transaction will now be $4.375 billion in cash, the assumption by WBA of the related real estate leases and the grant of the option to Rite Aid, exercisable through May 2019, to become a member of WBA’s group purchasing organization, Walgreens Boots Alliance Development GmbH. WBA will also assume certain limited store-related liabilities as part of the new transaction.

“This is a significant moment for our company, and we are excited about the opportunities this agreement will deliver for our customers and patients, employees and investors,” said WBA executive vice chairman and chief executive officer Stefano Pessina. “Combining Walgreens retail pharmacy network with a strong portfolio of Rite Aid locations is expected to help us achieve enhanced, sustainable growth while enabling us to broaden our reach and provide greater access to convenient, affordable care in more local neighborhoods across the United States. We are confident in the path ahead and look forward to working together to shape the future of health care and deliver on the full potential these stores bring to our network.”

Under this agreement, Rite Aid will retain 254 more stores than under the agreement announced in June, resulting in a reduction in the transaction sale price. The decision to retain these stores follows discussions between Rite Aid and WBA as well as the Federal Trade Commission.

Rite Aid also has the option to purchase generic drugs that are sourced through an affiliate of WBA at a cost substantially equivalent to that of Walgreens for a period of 10 years. The Hart-Scott-Rodino waiting period expired for the proposed transaction.

After all stores are acquired, they will be converted to the Walgreens brand in carefully planned phases over time. The stores to be purchased are located primarily in the Northeast and the South; the three distribution centers are located in Dayville, Conn.; Philadelphia; and Spartanburg, S.C. The transition of these distribution centers to Walgreens will not begin for at least 12 months.

Due to the expected timing of store purchases under the amended and restated asset purchase agreement, WBA does not expect the transaction to have a significant impact on its adjusted diluted net earnings per share in the fiscal year ending August 31, 2018. The company expects to realize annual synergies from the new transaction of more than $300 million, which are expected to be fully realized within four years of the initial closing of the new transaction and derived primarily from procurement, cost savings and other operational matters.

Immediately following the completion of the transaction, Rite Aid will continue to operate approximately 2,600 stores and six distribution centers as well as EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog. The company will leverage the capabilities of these subsidiaries to deliver a higher level of care in the communities it serves.

“Securing regulatory clearance provides us with a clear path forward to realize the benefits of this transaction,” said Rite Aid chairman and CEO John Standley. “With a compelling and more profitable store footprint in key markets, enhanced purchasing capabilities and a stronger balance sheet and improved financial flexibility, we are well positioned to implement our plans to deliver improved results.”

The new deal amends and replaces the earlier purchase agreement, which included 2,186 stores and related assets for $5.175 billion in cash and other consideration.