Drugstore operator Walgreens Boots Alliance Inc, which agreed to buy smaller rival Rite Aid Corp on Tuesday, reported better-than-expected quarterly net sales, helped by higher prescription sales.
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Rite Aid shares, which had risen 40 percent on Tuesday, also fell 8.6 percent to $7.93 on Wednesday. Besides its namesake stores, Deerfield, Illinois-based Walgreens also owns Duane Reade stores in the U.S.
Walgreens says the acquisition will greatly expand its footprint in the US, and the synergy between the two brand will likely be worth $1 billion a year. Walgreens said it has saved $799 million in fiscal 2015 after combining with Alliance Boots a year ago. The retail chain has a few 4,600 stores across the U.S. and is the largest drugstore chain on the East Coast.
Rite Aid locations across the Bayou State will initially keep their name and Walgreens officials haven’t said when they’ll change them. When Walgreens and Rite Aid merge, the company will have nearly 13,200 USA stores nationwide and 350 distribution centers in 11 countries. The stock had slumped 29 percent since September 16 after the company lowered profit and revenue forecasts for the year, giving Walgreens a potential opportunity to make an offer.
“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy”.
“This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients”.
It may be too early to be as hyper-critical of the deal as I am, but I firmly believe the bullishness surrounding this buyout is unwarranted, given the many issues Rite Aid has failed to work through over the years. Over time, however, the two companies will integrate to create a harmonized portfolio of stores and infrastructure.
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The Wall Street Journal said Walgreens Boots Alliance is in advanced talks to buy Rite Aid, which is based in Camp Hill, Pennsylvania. CVS and Target announced a deal this summer, subject to regulatory approval, that would place the drugstore chain’s pharmacists behind the counters in 1,660 of the mass merchant’s stores.
