If approved by regulators, the deal would see two of the biggest United States drug stores combined.
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Rite Aid Corporation (NYSE:RAD) stock skyrocketed over 40% in Tuesday’s trade, after the Wall Street Journal reported that the pharmacy retail giant may be close to being acquired by its competitor Walgreens Boots Alliance Inc. Rite Aid, based in Camp Hill, Pennsylvania, now operates eight stores in Westchester County.
In making the announcement after the markets closed, Walgreens said it agreed to pay $9 a share for Rite Aid, a 48% premium to Rite Aid’s closing stock price Monday.
Walgreens Boots Alliance anticipates that the deal will be accretive to its bottom line in the first full year following the merger’s completion and that its deeper pockets will allow Rite Aid to reinvest in its stores to drive sustainable growth. For the time being, Walgreens has made a decision to keep the Rite Aid brand name but may change its mind at a few point in the future.
Walgreens acquiring Rite Aid may prove to be a substantial step forward towards affordable pharmaceutical shopping and the number of real stores adds to the human factor value that over-the-Internet purchasing now lacks.
According to their respective websites, Rite Aid has more than 70 stores within a 50-mile radius of Harrisburg.
Walgreens shares fell as much as 8.5 percent on Wednesday. Pessina developed Bern, Switzerland-based Alliance Boots GmbH into a powerhouse through more than three decades of mergers before selling it to Walgreen Co. previous year. Rite Aid itself purchased EnvisionRx, a pharmacy-benefits manager, in June for about $2 billion and “scooped up two of its smaller drugstore rivals, Eckerd and Brooks”, in 2006, Sarah Halzack reports for the Washington Post. The Zacks Consensus Estimate for fiscal 2016 earnings is pegged at $4.53, within the company’s guidance range.
CVS, in fact, is partnering with the retailer Target Corp.to run its in-store clinics and pharmacies.
The company posted earnings of 88 cents per share on revenue of $28.52 billion for the quarter ended August 31, while analysts had estimated earnings of 81 cents per share on $28.45 billion.
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Other lawsuits are likely to follow and are likely to delay and disrupt the sale of Rite Aid to Walgreens at the current price of $9 a share.
