Drugstore operator Walgreens Boots Alliance Inc.is in advanced talks to buy smaller rival Rite Aid Corp., the Wall Street Journal reported, citing people familiar with the matter.
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Rite Aid will reportedly keep its name after the deal, although that could change over time.
Walgreens is paying $9 per share in cash for Rite Aid, a 48 percent premium to the company’s Monday closing price. Rite Aid stores that now share the same territory with Walgreens outlets, for example, could be put on the chopping block as the expanded company looks to cut costs.
The Journal said a deal could be announced Wednesday.
Alliance Boots leader Stefano Pessina, a driving force behind that deal, took over as CEO of the combined company in July.
The acquisition will add to Walgreens’ earnings beginning a full year after completion and will produce more than $1 billion in savings from cost overlaps, the companies said. It’s a word that probably has every Walgreen and Rite Aid employee a little nervous.
Rite Aid’s stock had previously lost 19 percent this year as both Walgreens and CVS climbed. Rite Aid has 93 Alabama locations.
Vishnu Lekraj, an analyst at Morningstar, thinks the deal would make sense, since it has a large presence in only a few regions (parts of the northeast, for example), making antitrust issues manageable. After Tuesday’s share-price jump, Rite Aid’s shares were still trading well below the highs they hit in August.
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“Our complementary retail pharmacy footprints in the United States will create an even better network, with more health and wellness solutions available in stores and online”. This is yet another thump in a steady drumbeat of healthcare M&As, many of which have involved major payers and pharmacies, including UnitedHealth’s .8 billion proposed deal for pharmacy benefits giant Catamaran.
