Walgreens and Rite Aid Agree to Cut Deal Price, Sell More Stores

Zachary BarrettFeb 01, 2017

Close on the heels of Rite Aid Corporation (NYSE:RAD) and Walgreens Boots Alliance Inc (NASDAQ:WBA) disclosing amendment in agreement and extension of deadline, S&P Capital IQ analyst Agnese reduced his target price by $2.50 from $9 to $6.50.

The new price is pegged at a minimum of $6.50 per share if the company is required to sell off 1,000 or fewer locations.

The acquisition, which would create the largest chain of U.S. drugstores, ahead of CVS Health (cvs), has so far failed to win approval from the U.S. Federal Trade Commission or assuage its anti-trust concerns. If the pharmacy retailer divests 1,000 to 1,200 stores, the price per share will be prorated. Walgreens agreed to purchase Rite Aid in October 2015, initially for $9 per share in cash. The lower price range would cut the deal's value to between $6.84 billion and $7.36 billion.

Walgreens has now has 13,200 stores worldwide; Rite Aid has 4,600. And it's set at $7 if the company is required to sell off 1,200 stores.

Walgreens recently offered to sell 865 stores to small regional chain Fred's (fred) for $950 million.

In July, Walgreens CEO Stefano Pessina said in an investors conference call that he expected the combined company would only have to divest about 500 stores to satisfy regulators' antitrust concerns. The original deal expired January 27, and the new one is set to expire at the end of July.

The announcement Monday comes after weeks of haggling with FTC lawyers on a way for Walgreens to buy Rite Aid.

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