Analyst: ‘Still chance of a reasonable outcome’ for Walgreens-Rite Aid deal

An Evercore ISI analyst maintained his “buy” rating on Walgreens Boots Alliance stock, stating that although its proposed deadline for a deal with Rite Aid has been delayed, “there is still a chance of a reasonable outcome for both parties.”



The companies pushed back the deadline for merger from Jan. 27 to July 31 and trimmed the purchase price paid to Rite Aid to $6.50 to $7 per share — based upon the number of store divestitures the FTC requires — from $9 per share.



“On the [Walgereens] front, shareholders will be quite content to pursue this transaction (cost rationalization / de-leveraging exercise) despite the elevated divestiture count with accretion / PF leverage likely biased positively given the >20% haircut to deal value,” Evercore analyst Ross Muken wrote in a note.



He added if the FTC prefers a buyer other than Fred’s Pharmacy to purchase at least 865 divested Rite Aid stores, the timing of the deal’s closing date will likely change.



“Note, if a second buyer is required, this could likely result in the timing of the transaction to be biased toward the end agreement date (July 31) vs. more near-to-medium term,” wrote Muken.



Muken has a price target of $93 on shares of Walgreens. It shares currently trade for approximately $81 per share.