Walgreens, Rite Aid Cut Merger Price, Postpone Close

Walgreens Boots Alliance and Rite Aid Corp. are reducing the price and postponing the close of their pending merger. Following the announcement, which was triggered after antitrust regulators voiced concern over the advantages the large combined company might have over competitors, Rite Aid shares fell 15 percent on Monday while Walgreens shares rose 0.3 percent.

As PG previously reported, Walgreens' acquisition of Camp Hill, Pa.-based Rite Aid would fuse the nation's largest and third-largest drugstore chains.

Under the new amendment, both drugstore chains agreed to reduce the price to $6.50 to $7 per share for a total transaction value in the range of $6.8 billion to $7.4 billion.

In addition, Walgreens will now be required to divest up to 1,200 Rite Aid stores – an increase of up to 200 stores over the 1,000 stores that Walgreens Boots Alliance had agreed to divest under the terms of the original agreement. In late December, Memphis, Tenn.-based Fred’s Pharmacy stepped up to purchase 865 stores in the eastern and western United States for $950 million in cash.

If the required divestitures fall between 1,000 and 1,200 stores, there will be a pro-rata adjustment of the price per share. The exact price per share will be determined based on the number of required store divestitures, with the price set at $7 per share if 1,000 stores or fewer are required for divestiture and at $6.50 per share if 1,200 stores are required for divestiture.

The drug chains will now extend the merger’s closing date from January 27, 2017 to July 31, 2017, in order to allow the parties additional time to obtain regulatory approval.

The transaction is subject to approval by the holders of Rite Aid’s common stock, as well as the expiration and termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.