Walgreens delays Rite Aid deal again, cuts offer price

Mon Jan 30, 2017 5:45pm EST
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(Reuters) - Drugstore chain Walgreens Boots Alliance Inc (WBA.O: Quote) said its deal to buy smaller rival Rite Aid Corp (RAD.N: Quote) would now take six months longer to close and also reduced its offer price as it expects to divest more stores to gain regulatory approval.

The companies said on Monday they agreed to reduce the offer price to $6.50-$7.00 per share, valuing Rite Aid at $6.84 billion-$7.37 billion. Walgreens had offered $9 per share in October 2015 when it first proposed the deal.

Rite Aid shares closed down 17.5 percent at $5.72, easing slightly after hitting a two-year low of $5.70, on Monday. Walgreens ended 2 cents lower at $81.48.

Under the revised terms, Walgreens will now need to divest up to 1,200 Rite Aid stores, 200 more than earlier agreed. The deal is now expected to close on July 31, compared with the previous target of Jan. 27.

Walgreens had struck a deal in December to sell 865 stores to Fred's Inc (FRED.O: Quote), but a Bloomberg report last week said the U.S. antitrust regulator was not satisfied with the plan.

"The one remaining uncertainty is who buys the incremental boxes as it is not clear to us that FRED has the financing capacity to do so," Evercore ISI analyst Ross Muken said in a note.

Fred's confirmed that the previously agreed deal remained in effect and said it continued to work with the Federal Trade Commission (FTC), Rite Aid and Walgreens to complete the deal.

Deerfield, Illinois-based Walgreens also cut its 2017 adjusted earnings forecast to $4.90-$5.08 per share from $4.85-$5.20. (bit.ly/2kjpNFu)

Walgreens said it would pay $7.00 per share if regulators required 1,000 stores or fewer to be divested and $6.50 per share for 1,200 stores, with the offer price being adjusted on a pro-rata basis for divestitures between 1,000-1,200 stores.   Continued...

A Rite Aid logo is seen outside one of their stores in New York, April 11, 2013.  REUTERS/Shannon Stapleton