Move gives regulator 60 days to wrap up review of merger
Late Monday, WBA and Rite Aid announced that they have “certified substantial compliance,” meaning that they have provided the information needed to determine if the Walgreens-Rite Aid merger is antitrust-compliant.
“We are pleased to have certified completion of our submission of documents and information to the FTC in connection with the second request,” Stefano Pessina, executive vice chairman and chief executive officer of WBA, said in a statement. “We will continue to work closely with the FTC regarding the pending transaction.”
The companies said that in January 2016 they entered into an agreement with the FTC to not close the merger deal until at least 60 calendar days after they had certified substantial compliance with the regulator’s second request. In March, the New York Post reported that WBA planned to give the FTC notice that it had substantially certified compliance with the information requested on the deal.
The transaction remains subject to the waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act and still must be approved by Rite Aid shareholders and meet other closing conditions.
“Our teams did a tremendous amount of work to deliver to the FTC the information to substantially comply with the second request,” Rite Aid chairman and CEO John Standley stated.
The FTC had made its second request for information on the WBA-Rite Aid deal in December 2015. That extended the waiting period until 30 days after WBA and Rite had substantially complied with the request, unless that period was terminated sooner by the FTC or extended by the companies.
At this point, the FTC has 60 days to complete its review of the transaction. The agency can close its investigation and clear the deal to move forward, enter into a settlement with the companies or block the deal.
In reporting fiscal 2016 results late last month, Rite Aid said it and WBA “continue to be actively engaged” in discussions with the FTC on the merger and are working to complete the transaction by July 31. The deal was amended earlier this year, requiring approval from Rite Aid shareholders.
Under the amended agreement with WBA, as many as 1,200 Rite Aid stores may be divested to gain FTC antitrust approval, up from the companies’ previous estimate of around 1,000. Fred’s Inc. has agreed to buy 865 or more Rite Aid stores in connection with the merger.
The revised price for the Walgreens-Rite Aid merger deal is $6.50 to $7.00 per share, putting the cash portion of the transaction at about $6.84 billion to $7.37 billion, plus the assumption of Rite Aid’s debt. The original acquisition offer on Oct. 27, 2015, was for $9 per share and the assumption of over $7 billion in net debt, for a total deal value of $17.2 billion.
The store divestitures will affect the ultimate share price for the deal. The price will be $7.00 per share if 1,000 stores or fewer are divested and $6.50 per share if 1,200 stores are needed for divestiture. If the required divestitures fall between 1,000 and 1,200 stores, the price per share will be adjusted based on that number.