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.