WBA secures regulatory clearance for new Rite Aid deal

DEERFIELD, Ill. — Walgreens Boots Alliance announced Tuesday that it has secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid for $4.38 billion in cash and other consideration.



“This is a significant moment for our company,” stated Stefano Pessina, executive vice chairman and CEO Walgreens Boots Alliance. “Combining Walgreens retail pharmacy network with a strong portfolio of Rite Aid locations is expected to help us achieve enhanced, sustainable growth while enabling us to broaden our reach and provide greater access to convenient, affordable care in more local neighborhoods across the United States."



"With a compelling and more profitable store footprint in key markets, enhanced purchasing capabilities and a stronger balance sheet and improved financial flexibility, we are well positioned to implement our plans to deliver improved results," added John Standley, chairman and CEO Rite Aid. "We are committed to supporting a smooth transition as we remain focused on delivering a great customer experience, improving our business and creating value for all of our stakeholders."



After all stores are acquired, stores are planned to be converted to the Walgreens brand in phases over time. The stores to be purchased are located primarily in the Northeast and Southern U.S., and the three distribution centers to be purchased are located in Dayville, Conn., Philadelphia, Pa., and Spartanburg, S.C. The transition of these distribution centers to Walgreens will not begin for at least 12 months.



Rite Aid will provide certain transition services to Walgreens Boots Alliance for up to three years after the closing of the transaction.



The consideration for the transaction will now be $4.375 billion in cash, the assumption by Walgreens Boots Alliance of the related real estate leases and the grant of the option to Rite Aid, exercisable through May 2019, to become a member of Walgreens Boots Alliance’s group purchasing organization, Walgreens Boots Alliance Development. Walgreens Boots Alliance will also assume certain limited store-related liabilities as part of the new transaction.



The transaction has been approved by the boards of directors of Rite Aid and Walgreens Boots Alliance and is still subject to other customary closing conditions. Store purchases are expected to begin in October, with completion anticipated in spring 2018.



Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness which will improve the company's leverage levels. Rite Aid also expects that the gain it will record on the sale of the assets will be largely offset by its net operating loss carryforwards, resulting in a minimal cash tax payment on this transaction.



Immediately following the completion of the transaction, Rite Aid will continue to operate approximately 2,600 stores and six distribution centers as well as EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog. The company will leverage the capabilities of these subsidiaries to deliver a higher level of care in the communities it serves.



The amended and restated asset purchase agreement replaces the earlier purchase agreement entered into by the parties in June 2017, which included 2,186 stores and related assets for $5.175 billion in cash and other consideration.