Shares of both companies jumped Tuesday after The Wall Street Journal first reported the deal.
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The cash deal of $9 per share is worth $17.2 billion and includes acquiring the debts.
Walgreens is already the largest retail drug store chain in the USA, with 8,232 stores. Instead, he said, the deal will increase Walgreens’ footprint in the US and save money by finding synergies with Rite Aid.
Rite Aid chief executive John Standley said: “Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid’s customers while also delivering significant value to our shareholders”.
For fiscal 2016, Walgreens Boots Alliance projects adjusted earnings of $4.25 to $4.55 per share, versus analysts’ estimates of $4.56 per share.
Walgreens has more than 13,200 stores in 11 countries and before the merger had been the second largest drugstore chain behind CVS.
Rite Aid operates approximately 4,600 stores in 31 states and the District of Columbia, with a strong presence on both the East and West Coasts. Management took numbers that they previously used to say how well Rite Aid was performing toward long-term goals and then twisted these numbers around to support selling Rite Aid at a low price to Walgreens. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance.
In July, Anthem Inc. reached a $54-billion deal to buy rival Cigna Corp. In 2014, Walgreens acquired Boots Alliance, a European pharmacy chain.
CVS, in fact, is partnering with the retailer Target Corp.to run its in-store clinics and pharmacies. He had served as interim CEO after the retirement of Greg Wasson when the merger between Walgreens and Alliance Boots was completed in 2014.
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For the latest quarter, Rite Aid’s bottom line has suffered on the back of high costs of acquisition and the subsequent integration of the recently bought pharmacy benefit management company, Envision Pharmaceutical Services. Walgreens stock, on the other hand, also rallied by 6.35% to close at $95.16.
