WBA to divest as many as 1,000 stores to secure Rite Aid deal approval
DEERFIELD, Ill. — The merger agreement between Walgreens Boots Alliance and Rite Aid must be consummated by Oct. 27, 2016, or the deal is off, according to documents filed to the Securities and Exchange Commission on Thursday. That deadline could be extended to Jan. 27, 2017 under some circumstances, according to the document.
If Rite Aid walks away from the deal at any time, Rite Aid will forfeit a $325 million termination fee to Walgreens. Rite Aid may also be required to pay up to an additional $45 million to cover expenses incurred by Walgreens.
Conversely, Walgreens will forfeit $325 million to Rite Aid if it's not able to secure regulatory approval of the deal, a figure that could double to $650 million if Walgreens "enters into, consummates or announces certain acquisitions within eight to 12 months of the date of the merger agreement [with Rite Aid]."
And Walgreens is willing to divest as many as 1,000 locations, or other holdings not to exceed an aggregate value of $100 million, in an effort to secure approval of the acquisition. Walgreens currently operates 8,173 stores in all 50 states plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Rite Aid, meanwhile, operates 4,561 locations across 31 states and Washington, D.C.
Even with 1,000 fewer stores, the combined operations would still field more than 11,000 locations nationwide.
The board of directors of each respective company has advocated for the acquisition of Rite Aid by Walgreens Boots Alliance in a deal valued at $17.2 billion. Now shareholders for both companies must approve the proposal, after which it will be reviewed by regulators.
The transaction is expected to close in the second half of 2016.
Congress members, NCPA urge close look at WBA-Rite Aid deal
WASHINGTON — As Walgreens and Rite Aid prepare to present a proposed merger to regulatory authorities, members of Congress and the National Community Pharmacists Association are pleading caution.
Sens. Mike Lee, R-Utah, and Amy Klobuchar, D-Minn., chairman and ranking member respectively of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, earlier this week issued the following statements in response to the announced merger between Walgreens and Rite Aid.
“Our Subcommittee has long been focused on competition in the health care sector,” Lee said. "In December 2011, we held a hearing to examine the competitive effects of the merger between Express Scripts and Medco, two of the largest PBMs. In 2014, we looked at competition in the contact lens market, and last month we held a hearing to discuss the mergers between four of the five largest national health insurers. Competition is essential in every part of our economy, and especially so in a market as complex and important as health care. With that in mind, we hope that the antitrust agencies will closely scrutinize the merger of Walgreens and Rite Aid, the second and third largest drug store chains."
“Competition in the health care industry is essential to keeping health care costs down for American consumers,” Klobuchar said. “I have fought tirelessly to promote competition in the health sector and I believe the proposed merger of two of the three largest drug store chains in the country raises serious issues. It is critical that the proposed Walgreens-Rite Aid merger is closely examined to ensure it does not increase drug prices for consumers or reduce choice for pharmacy services.”
And the National Community Pharmacists Association similarly called for scrutiny of the proposed deal. "This merger would create an entity with approximately 12,000 retail pharmacies. That's nearly 20 percent of the brick and mortar pharmacies in the U.S.," commented Douglas Hoey, NCPA CEO. "NCPA is evaluating the impact of the merged company on pharmacy small business owners and the patients they serve. At a minimum, regulators should closely scrutinize this merger, particularly in regions of high concentration of their pharmacies," he said. "While large chain pharmacies continue to merge to increase their negotiating leverage, independent community pharmacies continue to fill gaps in patient care in rural, urban and underserved communities."
Loading Post Please Wait...