Walgreens and Rite Aid cut deal price, may sell more stores

WALGREENS BOOTS Alliance Inc. and Rite Aid Corp.’s giant drugstore merger got smaller Monday after the companies cut the value of the deal by at least $2 billion and said they may divest more stores to gain approval. / BLOOMBERG NEWS PHOTO
WALGREENS BOOTS Alliance Inc. and Rite Aid Corp.’s giant drugstore merger got smaller Monday after the companies cut the value of the deal by at least $2 billion and said they may divest more stores to gain approval. / BLOOMBERG NEWS PHOTO

NEW YORK – Walgreens Boots Alliance Inc. and Rite Aid Corp.’s giant drugstore merger got smaller Monday after the companies, facing roadblocks from antitrust regulators, cut the value of the deal by at least $2 billion and said they may divest more stores to gain approval.

Walgreens will now pay $6.50 to $7 a share for Rite Aid, the companies said in a statement, giving the deal a value of $6.84 billion to $7.37 billion. That’s down from $9 a share, or $9.4 billion, announced in 2015. The exact price will depend on how many stores the companies have to divest, as they raised the ceiling to 1,200 stores, up from 1,000.

Shares of Rite Aid plunged 16 percent to $5.85 at 10:06 a.m. in New York. Walgreens shares were up less than 1 percent to $81.43.

The announcement is the latest blow to the drug chains’ attempt to combine. The new agreement also includes a six-month extension to July 31, after the companies had already approved a previous extension. Earlier this month, Bloomberg reported that Walgreens’s plan to win antitrust clearance for its acquisition of Camp Hill, Pennsylvania-based Rite Aid hadn’t satisfied Federal Trade Commission officials. Agency lawyers reviewing the deal weren’t sold on Walgreens’s plan to resolve competition concerns by selling stores to Fred’s Inc., another retail chain, people familiar with the process said at the time.

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In December, Fred’s agreed to buy 865 Rite Aid locations. The chain’s shares rose 3.5 percent to $14.61 Monday, as investors bet it could end up acquiring additional stores.

Representatives for Walgreens and Fred’s did not immediately respond to questions about how the changes in the Rite Aid deal would impact the divestiture agreement with Fred’s.

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