DEERFIELD, IL—Walgreens Boots Alliance said Thursday that it would likely divest more than the 500 stores it originally planned to sell off as part of its $17-billion acquisition of Rite Aid Corp. The Deerfield, IL-based drugstore chain said it continues to believe the merger with Rite Aid will close by the end of this year.
The two retailers “remain actively engaged with the Federal Trade Commission regarding its review of the pending acquisition,” Walgreens says in a statement. Walgreens is exploring “potential divestiture remedies” but continues to believe that fewer than 1,000 locations will need to be divested in order to satisfy FTC concerns. The company also expects to realize more than $1 billion in synergies from the Rite Aid purchase.
Fitch Ratings, which recently rated a $1-billion Walgreens term loan as BBB, says the retailer's announcement on store divestitures is consistent with the ratings agency's expectations for up to 1,000 closures. “Typically, drugstores are able to retain more of their customer base and sales than other types of retailers in consolidation as prescription files get transferred from closing stores to remaining ones,” says David Silverman, senior director at Fitch. “The company reiterated its $1 billion synergy guidance for the deal; we continue to believe $750 million is possible.”
Originally announced last October, the Walgreens/Rite Aid combination would merge the nation's second and third largest pharmacy chains by store count. Combined, the two companies operate nearly 18,000 stores, more than twice as many as top-ranked CVS Health Corp., which nonetheless leads in sales volume.
DEERFIELD, IL—Walgreens Boots Alliance said Thursday that it would likely divest more than the 500 stores it originally planned to sell off as part of its $17-billion acquisition of Rite Aid Corp. The Deerfield, IL-based drugstore chain said it continues to believe the merger with Rite Aid will close by the end of this year.
The two retailers “remain actively engaged with the Federal Trade Commission regarding its review of the pending acquisition,” Walgreens says in a statement. Walgreens is exploring “potential divestiture remedies” but continues to believe that fewer than 1,000 locations will need to be divested in order to satisfy FTC concerns. The company also expects to realize more than $1 billion in synergies from the Rite Aid purchase.
Fitch Ratings, which recently rated a $1-billion Walgreens term loan as BBB, says the retailer's announcement on store divestitures is consistent with the ratings agency's expectations for up to 1,000 closures. “Typically, drugstores are able to retain more of their customer base and sales than other types of retailers in consolidation as prescription files get transferred from closing stores to remaining ones,” says David Silverman, senior director at Fitch. “The company reiterated its $1 billion synergy guidance for the deal; we continue to believe $750 million is possible.”
Originally announced last October, the Walgreens/Rite Aid combination would merge the nation's second and third largest pharmacy chains by store count. Combined, the two companies operate nearly 18,000 stores, more than twice as many as top-ranked CVS Health Corp., which nonetheless leads in sales volume.
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