Walgreens to buy smaller drugstore rival Rite-Aid for $9.4 bn
28 Oct 2015
US drugstore chain Walgreens Boots Alliance Inc yesterday struck a deal to buy its smaller rival Rite Aid Corp for $9.4 billion in order to expand its footprint in the country.
Under the terms of the friendly deal, Walgreens is offering to pay $9-a-share in cash, a 48 per cent premium to Rite-Aid's Monday closing price.
The total deal value including debt is $17.2 billion. Walgreens expects to generate synergies of more than $1 billion.
Walgreens expects to fund the deal through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.
Upon completion of the merger, Rite Aid will be a wholly-owned subsidiary of Walgreens Boots, and is expected to initially operate under its existing brand name.
The transaction that would combine the second- and third-largest drugstore chains in the US will draw intense scrutiny from the US regulators.
Both companies have a market cap of more than $100 billion and Rite Aid had 2014 revenue of $26.5 billion, while Walgreens had revenue of $76.4 billion.
Pennsylvania-based Rite Aid is one of the three-largest drugstore chains in the US with nearly 4,600 stores in 31 states and the District of Columbia with a strong presence on both the East and West Coasts.
Formed in 2014 through the merger of Walgreens and Alliance Boots, Illinois-based Walgreens employs more than 370,000 people and has a presence in over 25 countries.
It is the largest retail pharmacy, health and daily living destination in the US and Europe with over 13,100 stores in 11 countries.
It is also one of the world's largest purchasers of prescription drugs and many other health and well-being products.
Its portfolio of retail and business brands includes Walgreens, Duane Reade, Boots and Alliance Healthcare, as well as increasingly global health and beauty product brands, such as No7, Botanics, Liz Earle and Soap & Glory.
''This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients. Our complementary retail pharmacy footprints in the US will create an even better network, with more health and wellness solutions available in stores and online,'' said Walgreens executive vice chairman and CEO, Stefano Pessina.
''Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid's customers while also delivering significant value to our shareholders,'' said Rite Aid chairman and CEO, John Standley.