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Shares of Rite Aid (NYSE: RAD) were down 17% as of 1:30 p.m. EST Monday after the company agreed to a delay and price reduction for its planned merger with Walgreens Boots Alliance (NASDAQ: WBA).
More specifically, both companies have agreed to reduce the price Walgreens Boots Alliance will pay for each share of Rite Aid to a maximum of $7.00 per share and a minimum of $6.50 per share -- down from the originally agreed priceof $9.00 per share in October 2015. Walgreens Boots Alliance will also be required to divest up to 1,200 Rite Aid stores, as well as other certain additional related assets if required to obtain regulatory approval for the transaction. The final acquisition price will depend on the number of required store divestitures -- $7.00 per share if 1,000 or fewer are required, $6.50 per share if 1,200 are required, and a pro-rata adjustment if the number falls between 1,000 and 1,200.
Finally, the transaction end date has been extended from Jan. 27, 2017 (last Friday) to July 31, 2017, to give the companies time to satisfy the conditions for regulatory approval.
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To be fair, this isn't entirely surprising. Shares of Rite Aid plunged 11%just over a week ago after reports surfaced stating the U.S. Federal Trade Commission wasn't satisfied with Walgreens' plan to gain antitrust clearance by selling 865 Rite Aid locations to Fred's Inc. (NASDAQ: FRED) last month. But it's only natural that Rite Aid shares would fall further given not only the reduced price of the delayed deal, but also the uncertainty it creates for whether the merger will ultimately come to fruition later this year.
As it stands, while it would be hard to blame investors for hanging around with Rite Aid shares trading more than 11% below the minimum acquisition price, I wouldn't blame them for taking their money off the table today and putting it to work elsewhere.
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