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What Will the Failed Rite Aid-Walgreens Merger Mean to Net Lease Investors?

Walgreens had entered into an agreement to acquire Rite aid in October 2015. The agreement was stalled while both companies waited for approval from…

Jonathan Hipp

Walgreens had entered into an agreement to acquire Rite aid in October 2015. The agreement was stalled while both companies waited for approval from the Federal Trade Commission (FTC). In December 2016, divestiture of many Rite Aid locations to Fred’s, Inc was announced. This was intended as an appeasement in order to get the FTC’s approval.

Walgreens and Rite Aid made the decision to scrap the merger after receiving feedback from the FTC leading them to believe the merger was not going to be approved. They have announced a new agreement, Walgreens will purchase 2,186 stores, three distribution centers, and related inventory from Rite Aid. Rite Aid will receive $5.175 billion in cash for the stores, a $325 million termination fee, and the ability to purchase generic drugs from a Walgreens affiliate at cost for the next 10 years. The proceeds from the sale and termination fee will be used by Rite Aid to reduce debt and improve financial flexibility.

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Jonathan Hipp

Jonathan Hipp

Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.

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