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WBA, Rite Aid amend merger deal

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DEERFIELD, Ill. — Walgreens Boots Alliance Inc. (WBA) and Rite Aid Corp. have extended the end date for their merger by six months, while lowering the offer price. The companies pushed the deal’s end date to July 31 — after a previous extension expired January 27 — to give them extra time to gain regulatory approval from the Federal Trade Commission.

The price for WBA to acquire Rite Aid has been reduced to $6.50 to $7 per share, which would lower the cash portion of the transaction to approximately $6.84 billion to $7.37 billion, plus assumption of debt. The original offer in October 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.

WBA also raised the number of stores that could be divested for antitrust clearance of the merger. The company said it will divest up to 1,200 Rite Aid outlets and certain other assets — 200 more stores than the 1,000 it originally said it was willing to divest.

Prospective buyer Fred’s Inc. reaffirmed its $950 million offer to buy 865 Rite Aid stores. Fred’s also said it would purchase additional stores to the extent the FTC requests that more be sold, and WBA agrees to sell them.

“The amendment and extension of the Walgreens-Rite Aid merger agreement reinforces the company’s confidence that the transaction is in the mutual best interest of Fred’s Pharmacy and all of its shareholders,” Fred’s said in a statement. “Fred’s Pharmacy continues to work with the FTC, Rite Aid and Walgreens to complete the transaction and looks forward to realizing the considerable benefits the transaction will bring to customers, patients, payers, supplier partners, team members and shareholders.”

The store divestiture total will affect the ultimate share price for the deal. The price will be $7 per share if 1,000 stores or fewer are divested and $6.50 per share if the figure is 1,200. If the required divestiture falls between 1,000 and 1,200 stores, the price per share will be adjusted pro rata.
Besides FTC approval, the amended agreement is subject to approval by Rite Aid shareholders as well as other customary closing conditions.


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