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NEW YORK — Walgreens Boots Alliance is in discussions about a possible acquisition of Rite Aid Corp., the Wall Street Journal reported.
The Journal report said Tuesday that the talks are advanced and that a deal could be announced as soon as Wednesday. Walgreens Boots Alliance is scheduled to report fiscal 2015 results on Wednesday.
According to the Journal report, Rite Aid could be valued at as much as $10 billion; the company has a market capitalization of about $6 billion.
As of afternoon trading on Tuesday, Rite Aid’s share price has surged more than 40% to $8.53. Trading of the company’s shares had halted briefly earlier in the day.
If completed, the merger would bring together the nation’s first- and third-largest drug chains, with close to 13,000 stores across the country overall. Walgreens has more than 8,200 pharmacy locations nationwide, while Rite Aid operates over 4,500 drug stores in 31 states and the District of Columbia.
Speculation about a potential acquisition of Rite Aid by Walgreens has brewed for years but heated up in March after Stefano Pessina, then acting chief executive officer of Walgreens Boots Alliance, commented at a conference in London that, of potential deals to be made, “the next big one will probably be in the U.S.”
Both Walgreens and Rite Aid have undergone tremendous changes in recent years. In June 2012, Walgreen Co. unveiled a deal to buy a 45% stake in Alliance Boots as the first step of a planned merger of the companies to form Walgreens Boots Alliance. The combined company, which also has a partnership with AmerisourceBergen Corp., made its formal debut at the start of 2015. Leadership also has changed over, with Walgreens CEO Greg Wasson retiring upon the inception of the merged company and Pessina being named as permanent CEO in July. Alliance Boots executives also have since taken many key management posts.
Meanwhile, Rite Aid has righted its financial ship by reducing and refinancing debt and bolstering its sales and store base with a thriving loyalty program, called wellness+, and a new format, dubbed the Wellness Store. More recently, the company has pursed a strategy to transform itself into a retail health care company with the acquisitions of RediClinic, a retail health clinic operator; Health Dialog, a provider of health coaching services; and EnvisionRx, a pharmacy benefit manager.
With changes in pharmaceutical pricing and the health care landscape with the advent of the Affordable Care Act, the need for scale has intensified for pharmacy chains.
CVS Health, Walgreens and Rite Aid over the past few years have struck deals with drug distributors Cardinal Health Inc., AmerisourceBergen and McKesson Corp., respectively, to bolster their pharmaceutical purchasing capabilities, especially for generic drugs. All three companies, too, have continued to branch out their clinical pharmacy, specialty pharmacy and health care services.
CVS and Walgreens also have acquired small regional drug chains in recent years, such as Navarro Discount Pharmacy (CVS) and Kerr Drug (Walgreens). In June, CVS Health — whose CVS/pharmacy unit is the second-largest U.S. drug chain, with roughly 7,8oo stores — announced a deal to buy Target Corp.’s pharmacy business, which has about 1,660 locations. At the time, some industry observers speculated that the CVS-Target deal would prompt Walgreens Boots Alliance to make an acquisition, with Rite Aid as a potential target.
