Walgreens Boots Alliance Inc. and Rite Aid Corp. nixed their $9.4 billion merger agreement, which had been heavily scrutinized by antitrust regulators, and reached a new deal in which Walgreens instead will buy half of Rite Aid's stores for $5.1 billion in cash.
Investors had been awaiting a government decision on whether the delayed tie-up between the drugstore chains would go through and had grown increasingly uneasy that the deal could fall apart.
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In a statement, Rite Aid said the decision to spike the previous deal comes after it received feedback from the Federal Trade Commission that the merger likely wouldn't have gotten government approval.
Among the antitrust concerns was that the resulting drugstore giant -- which would have challenged CVS Health Corp. -- would have been able to bully pharmacy-benefit managers steering corporate and government drug plans. The deal was announced in October 2015.
The new transaction terminates the previous deal, as well as Rite Aid's agreement to sell some of its stores to Fred's Inc. Walgreens will pay Rite Aid a $325 million termination fee. The new deal represents about 48% of the 4,523 stores Rite Aid operated as of the end of the first quarter.
Upon closing, Walgreens will start acquiring the Rite Aid stores, three distribution centers and related inventory over a six-month period. The stores eventually will be converted to the Walgreens brand.
Walgreens Chief Executive Stefano Pessina said the company believes the new transaction "addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders."
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
June 29, 2017 07:54 ET (11:54 GMT)