Walgreens, Rite Aid scrap merger, outline new deal
DEERFIELD, Ill. — Walgreens Boots Alliance Thursday morning announced a new Rite Aid deal, effectively scuttling its proposal to acquire the Camp Hill, Pa.-based chain and surrendering the $325 million termination fee with respect to the old merger agreement. The divestiture agreement with Fred's Pharmacy is terminated.
“This new transaction extends our growth strategy and offers additional operational and financial benefits,” Stefano Pessina, executive vice chairman and CEO of Walgreens Boots Alliance, said. “It will allow us to expand and optimize our retail pharmacy network in key markets in the U.S., including the Northeast, and provide customers and patients with greater access to convenient, affordable care. We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders.”
Under the new agreement, Walgreens Boots Alliance will acquire 2,186 of Rite Aid's 4,523 locations for a consideration of $5.175 billion in cash, the assumption by Walgreens Boots Alliance of the related real estate leases and the grant of an option to Rite Aid, exercisable through May 2019 and subject to certain conditions, to become a member of Walgreens Boots Alliance’s group purchasing organization, Walgreens Boots Alliance Development.
"While we believe that pursuing the merger with WBA was the right thing to do for our investors and customers, this new agreement provides a clear path forward and positions Rite Aid as a strong, independent, multi-regional drugstore chain and pharmacy benefits manager with a compelling footprint in key markets," said John Standley, chairman and CEO of Rite Aid. "The transaction offers clear solutions to assist us in addressing our pharmacy margin challenges and allows us to significantly reduce debt, resulting in a strong balance sheet and improved financial flexibility moving forward."
The 2,186 stores included in the agreement are primarily located in the Northeast, Mid-Atlantic and Southeastern regions of the United States. The three distribution centers included in the agreement are located in Dayville, Conn., Philadelphia and Spartanburg, S.C. Under the terms of the agreement, Rite Aid will provide certain transition services to WBA for up to three years after the closing of the transaction.
This new agreement replaces the previous merger agreement with Rite Aid, announced in October 2015 and amended in January 2017, and the agreement to divest certain Rite Aid stores to Fred’s, announced in December 2016. The initial closing of the new transaction is expected to occur within the next six months. Walgreens Boots Alliance also will assume certain limited store-related liabilities as part of the new transaction.
Walgreens Boots Alliance said it expects the new transaction to be modestly accretive to its adjusted diluted net earnings per share in the first full year after the transaction closes, with the expectation to realize synergies from the deal in excess of $400 million. These synergies are expected to be fully realized within three to four years of the initial closing of the new transaction, and will be largely derived from procurement, cost savings and other operational matters, the companies said.
Walgreens partners with LabCorp on in-store lab testing services
DEERFIELD, Ill. — Walgreens and LabCorp on Wednesday announced a collaboration through which LabCorp will develop and operate patient service centers within select Walgreens stores. The centers, which will be co-branded “LabCorp at Walgreens,” will offer LabCorp patient services in a secure, comfortable environment for specimen collection, located near the pharmacy area inside the store.
Seven LabCorp at Walgreens locations will begin seeing patients in 2017, with five patient service centers in Denver and one in Morrisville, N.C. expected to open later this summer. A Deerfield, Ill., location is planned to open by the end of the year.
“I cannot imagine a better partner than Walgreens to bring LabCorp closer to consumers in locations where they are already accessing high-quality health care services,” stated David King, LabCorp’s chairman and CEO. “The customer-centric culture and nationwide footprint of Walgreens are a perfect match for LabCorp and the patients we serve. This significant collaboration will enhance LabCorp’s patient engagement in key markets across the country and offer increased access to LabCorp’s broad range of laboratory services as we execute our mission to improve health and lives.”
For Walgreens, making lab testing available at its retail locations complements the expanded services offered through its pharmacy and Healthcare Clinics, as part of the company’s efforts to help meet patients’ needs for greater access to affordable health care. The LabCorp relationship further demonstrates the value of deeper collaborations with health care service providers in improving care coordination and providing greater benefit, care and service for patients and payers.
“This agreement brings together Walgreens trusted pharmacy and community health care services with LabCorp’s long-standing reputation for innovation and quality in diagnostic laboratory testing,” said Alex Gourlay, Walgreens president and co-chief operating officer, Walgreens Boots Alliance. “We look forward to bringing affordable and accessible health care to the communities we serve.”
The LabCorp at Walgreens initiative represents another step in LabCorp’s enhancement of the customer experience and delivery of high-quality, cost-effective laboratory testing. LabCorp’s patient-centric initiatives include being the first national laboratory to offer laboratory access through retail outlets; online appointment scheduling for all of its patient service centers; giving patients the opportunity to receive notifications about potential participation in clinical trials; introducing innovative tools and technology such as self-service patient check-in and AccuDraw to improve specimen collection accuracy; providing a no-cost, easy-to-use online patient portal for patients to receive test results directly and offering an out-of-pocket cost estimator service for patients who have their specimen collected by LabCorp (available for most commercial insurance plans during 2017).
The initial Walgreens sites will be in addition to LabCorp’s approximately 1,750 existing patient service centers, providing even more options for patients to access LabCorp’s menu of over 4,800 tests, including leading offerings in important areas such as women’s health, genomics, oncology and companion diagnostics. Tests on specimens collected at the Walgreens locations will be performed through LabCorp’s nationwide network of primary and specialty laboratories.
Fred’s adopts poison pill as merger deadline looms
MEMPHIS, Tenn. — As the July 7 deadline for the Federal Trade Commission’s decision on the Walgreens-Rite Aid merger gets closer, Fred’s Pharmacy is taking action to protect itself as the deadline for the Federal Trade Commission’s decision on Walgreens Boot Alliance’s proposed acquisition of Rite Aid merger draws closer.