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NEW YORK — Walgreens Boots Alliance Inc. (WBA) and Rite Aid Corp. have entered into an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred’s Inc. for $950 million.
The all-cash transaction, announced Tuesday, is subject to Federal Trade Commission approval, as well as the completion of the pending acquisition of Rite Aid by WBA, and other customary closing conditions.
The agreement was undertaken in response to concerns identified by federal regulators in their review of the proposed acquisition of Rite Aid by WBA, which was announced in October 2015. A WBA spokesman says the company is actively engaged in discussions with the FTC regarding the transaction, which it hopes to close early next year.
The proposed divestiture would establish Memphis-based Fred’s as one of the largest drug chains in the United States, with significant presence in the South, its current base, as well as on the East and West Coasts. Specific locations of the stores to be divested will be announced upon FTC approval of the WBA merger with Rite Aid.
Fred’s chief executive officer Mike Bloom comments, “This will be a transformative event for Fred’s Pharmacy that will accelerate our health care growth strategy through our acquisition of 865 new stores located in highly attractive markets. We believe that this transaction will also create tremendous opportunities for both our new and existing front-of-store and pharmacy team members. We look forward to realizing the considerable benefits this transaction will bring to our customers, patients, payors, supplier partners, team members and shareholders.”
Under the terms of the purchase agreement, Fred’s expects to continue to employ all store associates at the acquired locations and certain field and regional associates related to the operations. Fred’s would continue to operate the acquired stores under the Rite Aid banner during a 24-month transition period. If the FTC requires divestiture of more than the 865 Rite Aid stores currently contemplated by the purchase agreement and WBA agrees to sell such stores, the purchase agreement requires Fred’s to purchase such additional stores.
WBA continues to expect that it will realize synergies from the acquisition of Rite Aid in excess of $1 billion, to be fully realized within three to four years of the closing of the merger. These synergies, as previously disclosed, are expected to be derived primarily from procurement, cost savings and other operational matters.
“We are pleased to have found an experienced pharmacy operator for these stores,” remarks WBA executive vice chairman and CEO Stefano Pessina. “With this agreement, we are moving ahead with important work necessary to obtain approval of our acquisition of Rite Aid. We look forward to continuing to provide our customers and patients with the highest level of care and attention.”
“We greatly appreciate the dedication of our Rite Aid associates, who are taking great care of our customers and patients during this period,” notes Rite Aid chairman and CEO John Standley. “We look forward to working closely with Fred’s to ensure a smooth, successful transition for our customers, patients and associates in the divested stores.”
