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Shares of Rite Aid fell more than 10% on Tuesday after Walgreens Boots (WBA - Free Report) received government approval to buy fewer Rite Aid stores than had initially been proposed.
In order to clear a regulatory hurdle presented by the Federal Trade Commission, Walgreens Boots said it would only buy 1,932 stores from Rite Aid. The deal is still worth a whopping $4.38 billion, but that total is a full 254 fewer stores than the companies agreed to in June.
Walgreens Boots also said that it intends to acquire three Rite Aid distribution centers located in Connecticut, Pennsylvania, and South Carolina. The exchange and transition of these distribution centers will not begin for at least another year, however.
Today’s approval looks to be the final chapter in what has been a lengthy saga involving Walgreens and Rite Aid. Earlier this year, Walgreens said it was calling off its nearly two-year operation to acquire its rival pharmacy company after numerous antitrust cases halted the deal.
Instead, Walgreens would settle for acquiring just under half of Rite Aid’s domestic stores—a figure that has obviously since been reduced. Still, the store purchase plan should help widen Walgreens Boots’ foothold in the U.S., where it also competes with the likes of CVS Health Corp. (CVS - Free Report) .
“With this process taking close to two years to come to a conclusion, we think the final outcome and the structure of the transaction were well anticipated,” an analyst at Pivotal Research Group told CNBC. “However, with each recent iteration of the transaction, the economics appear to be shifting more and more in Walgreens' favor.”
The store purchases will begin in October and will be completed in spring 2018, Walgreens said. The company also noted that the acquisitions will not have a significant impact on the company’s earnings for the fiscal year ending Aug. 31, 2018, although it expects annual synergies to reach $300 million eventually.
“We are confident in the path ahead and look forward to working together to shape the future of health care and deliver on the full potential these stores bring to our network,” Walgreens CEO Stefano Pessina said in a press release.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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Why Did Rite Aid (RAD) Stock Crash Today?
Shares of Rite Aid fell more than 10% on Tuesday after Walgreens Boots (WBA - Free Report) received government approval to buy fewer Rite Aid stores than had initially been proposed.
In order to clear a regulatory hurdle presented by the Federal Trade Commission, Walgreens Boots said it would only buy 1,932 stores from Rite Aid. The deal is still worth a whopping $4.38 billion, but that total is a full 254 fewer stores than the companies agreed to in June.
Walgreens Boots also said that it intends to acquire three Rite Aid distribution centers located in Connecticut, Pennsylvania, and South Carolina. The exchange and transition of these distribution centers will not begin for at least another year, however.
Today’s approval looks to be the final chapter in what has been a lengthy saga involving Walgreens and Rite Aid. Earlier this year, Walgreens said it was calling off its nearly two-year operation to acquire its rival pharmacy company after numerous antitrust cases halted the deal.
Instead, Walgreens would settle for acquiring just under half of Rite Aid’s domestic stores—a figure that has obviously since been reduced. Still, the store purchase plan should help widen Walgreens Boots’ foothold in the U.S., where it also competes with the likes of CVS Health Corp. (CVS - Free Report) .
“With this process taking close to two years to come to a conclusion, we think the final outcome and the structure of the transaction were well anticipated,” an analyst at Pivotal Research Group told CNBC. “However, with each recent iteration of the transaction, the economics appear to be shifting more and more in Walgreens' favor.”
The store purchases will begin in October and will be completed in spring 2018, Walgreens said. The company also noted that the acquisitions will not have a significant impact on the company’s earnings for the fiscal year ending Aug. 31, 2018, although it expects annual synergies to reach $300 million eventually.
“We are confident in the path ahead and look forward to working together to shape the future of health care and deliver on the full potential these stores bring to our network,” Walgreens CEO Stefano Pessina said in a press release.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
4 Promising Stock Picks to Keep an Eye On
With news stories about computer hacking and identity theft becoming increasingly commonplace, the cybersecurity industry looks like a promising investment opportunity. But which stocks should you buy? Zacks just released Cybersecurity: An Investor’s Guide to Locking Down Profits to help answer this question.
This new Special Report gives you the information you need to make well-informed investment choices in this space. More importantly, it also highlights 4 cybersecurity picks with strong profit potential. Get the new Investing Guide now>>