Walgreens Boots To Buy 2,186 Rite Aid Stores, Related Assets For $5.18 Bln

(RTTNews) - Walgreens Boots Alliance, Inc. (WBA) announced Thursday a new definitive agreement with Rite Aid Corp. (RAD), under which Walgreens will purchase 2,186 stores, three distribution centers and related inventory from Rite Aid. The consideration for the transaction will be $5.175 billion.

Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.

The latest agreement replaces the previous merger agreement with Rite Aid, announced in October 2015 and amended in January 2017, and the agreement to divest certain Rite Aid stores to Fred's, Inc. announced in December 2016.

Both of these agreements have been terminated, and Walgreens will pay Rite Aid the $325 million termination fee with respect to their merger agreement.

The initial closing of the new transaction is expected to occur within the next six months.

Upon the initial closing of the new transaction, Walgreens will begin acquiring the stores and related assets on a phased basis over a period of approximately six months, and intends to convert acquired stores to the Walgreens brand over time.

Walgreens expects the new transaction to be modestly accretive to its adjusted net earnings per share in the first full year after the initial closing of the new transaction, and expects to realize synergies from the new transaction in excess of $400 million.

Rite Aid said it expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing Rite Aid's leverage levels.

Rite Aid will continue to operate EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog. Rite Aid had a total store count of 4,523 at the end of the first quarter.