Earlier Tuesday morning, trading in Rite Aid had halted briefly pending a significant corporate news announcement, but not before Rite Aid shares were up nearly 40% to $8.34.
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Walgreens Boots will pay US$9.00 a share in cash for Rite Aid, a 48 per cent premium over the closing share price on Monday.
A Walgreens-Rite Aid deal would need approval from the U.S. Federal Trade Commission, which studies retail mergers to ensure they comply with antitrust law.
Rite Aid CEO John Standley is eligible to receive $23.4 million if he’s terminated after the deal, according to data compiled by Bloomberg based on Walgreens’ offer price per share.
A deal is expected to be announced by Wednesday, the newspaper said. It would also give Walgreen entrée into the pharmacy benefits management trade, a business that CVS has used to distinguish itself from the retail competition.
It also may provide a little more leverage for hashing out reimbursement terms with payers like health insurers, noted analyst Vishnu Lekraj, who covers the sector for Morningstar. Rite Aid had prescription drug sales of $18.1 billion in fiscal 2015, up from $17.2 billion in the previous year.
Walgreens now operates more than 13,200 stores across 11 countries, as well as approximately 400 Healthcare Clinics throughout the United States.
Walgreens is in talk to acquire Rite Aid.
“Working together, decisions will be made over time regarding the integration of the two companies, ultimately creating a fully harmonized portfolio of stores and infrastructure”, the company said. The company expects to save more than $1 billion in “synergies”, which could come in the form of combined purchasing power and cost cuts.
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Rite Aid had become the subject of acquisition rumors just last month when the company reported poor profit numbers that sent shares sharply lower.
