The parent company of the Walgreens drug store chain plans to buy rival Rite Aid in a $17.2 billion deal that will combine two of the three biggest pharmacy companies in the Atlanta market and in the U.S.
Walgreens Boots Alliance said Tuesday it will by Rite Aid for $9 per share, merging Rite Aid into a company that includes the Walgreens, Duane Reade and Boots pharmacy brands on both sides of the Atlantic Ocean.
The merger, if it survives regulatory scrutiny, further tightens the ranks of major drug store companies to basically two retail behemoths – Walgreens and CVS.
The deal is subject to approval by Rite Aid shareholders and is expected to close in the second half of next year, the companies said in a news release.
The release said Rite Aid will operate as a subsidiary upon completion of the tie-up and will at least initially operate under its own brand.
There is some overlap in the brands, particularly in the Southeast. It’s not uncommon in metro Atlanta to see a Walgreens and a Rite Aid on opposite corners or at least not far from one another. The release said that decisions will be made about the integration of the companies.
“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy. In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, well-being and beauty products and services,” Walgreens Boots Alliance Executive Vice Chairman and CEO Stefano Pessina said in the release. “This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients.”
USA Today, citing research firm IBIS World, said CVS makes up nearly three-fifths of the retail pharmacy market, with Walgreens taking up about one-third. Rite Aid hold about 10 percent of the market.
The retail pharmacy business has been challenged by mail-order competitors. A wave of consolidation over many years has trimmed the ranks of regional and national players. Grocers and big box companies also have taken a bite out of the business.
“Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online,” Pessina said. “Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. healthcare system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time.”
Those “synergies” or cost savings are expected to be $1 billion, the release said.