Your Local Rite Aid Will Become A Walgreens

(RTTNews) - Rite Aid Corp. (RAD) and Walgreens Boots Alliance Inc. (WBA) have secured regulatory clearance for an amended and restated purchase agreement, under which Walgreens will buy 1,932 stores, three distribution centers and related inventory from Rite Aid for $4.375 billion in cash.

In June, Rite Aid agreed to sell 2,186 stores, related distribution assets and inventory to Walgreens for $5.175 billion. This purchase agreement has now been amended and restated.

Under the amended deal, Rite Aid will retain about 250 additional stores as compared to the prior agreement, resulting in a reduction in the transaction sale price. The decision to retain these stores follows discussions between Rite Aid, WBA and the U.S. Federal Trade Commission or FTC.

Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at a cost substantially equivalent to Walgreens for a period of ten years.

The boards of directors of Rite Aid and WBA have approved the amended deal, which does not require a shareholder vote and is still subject to other customary conditions.

The 1,932 stores included in the deal are primarily located in the Northeast and Southern regions of the U.S. The three distribution centers are located in Dayville in Connecticut, Philadelphia, and Spartanburg in South Carolina.

Rite Aid will provide certain transition services to WBA for up to three years after the transaction closes. The companies expect to transfer ownership of the stores in phases beginning in October 2017, with the completion anticipated in spring 2018.

Rite Aid plans to use a substantial majority of the net proceeds from the transaction to repay its existing debt.

Immediately following completion of the deal, Rite Aid will continue to operate about 2,600 stores and six distribution centers as well as EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog.

Meanwhile, Walgreens Boots said it does not expect the transaction to significantly impact its adjusted earnings per share in its fiscal year ending August 31, 2018. The company expects to realize annual synergies of more than $300 million within four years of the initial closing.