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Walgreens buys Rite Aid in $17.2 billion deal

10/27/2015

Walgreens Boots Alliance and Rite Aid Tuesday evening announced that they have entered into a definitive agreement under which Walgreens Boots Alliance will acquire all outstanding shares of Rite Aid for $9 per share in cash, for a total enterprise value of approximately $17.2 billion, including acquired net debt.



The purchase price represents a premium of 48% to the closing price per share on Oct. 26, the day before the agreement was signed. Earlier Tuesday morning, trading in Rite Aid had halted briefly pending a significant corporate news announcement, but not before Rite Aid shares were up almost 40% to $8.34. Walgreens Boots Alliance shares were similarly up almost 5% to $94.31.



Walgreens Boots Alliance is highly focused on building a differentiated in-store experience for health, wellness and beauty, and this combination will help accelerate Rite Aid’s own efforts toward that end, the companies said. Once the acquisition closes, Walgreens Boots Alliance plans to further transform Rite Aid’s stores to better meet consumer needs.



“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy," Walgreens Boots Allliance executive vice chairman and CEO Stefano Pessina said. “In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, wellbeing and beauty products and services. This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients. Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online. Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. healthcare system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time.”



The boards of directors of both companies have approved the transaction, which is subject to approval by the holders of Rite Aid’s common stock, the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The transaction is expected to close in the second half of calendar 2016.



“Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid’s customers while also delivering significant value to our shareholders,” Rite Aid chairman and CEO John Standley said. “This transaction is a testament to the hard work of all our associates to deliver a higher level of care to the patients and communities we serve. Together with Walgreens Boots Alliance, the Rite Aid team can continue to build upon this great work through access to increased capital that will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and wellbeing enterprise.”



The transaction is expected to be accretive to Walgreens Boots Alliance’s adjusted earnings per share in its first full year after completion.



Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance, and is expected to initially operate under its existing brand name, with collaborative decisions being made over time regarding the integration of the two companies, with the ultimate goal of creating a fully harmonized portfolio of stores and infrastructure.



Walgreens Boots Alliance expects to finance the transaction through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.



Citi acted as Rite Aid’s exclusive financial adviser, with Skadden, Arps, Slate, Meagher & Flom acting as its legal counsel on transaction legal matters and Jones Day acting as its legal counsel on antitrust regulatory matters.



UBS Investment Bank acted as Walgreens Boots Alliance’s financial adviser and provided a fairness opinion to the board of directors of Walgreens Boots Alliance, with Simpson Thacher & Bartlett acting as its legal counsel on transaction legal matters and Weil, Gotshal & Manges acting as its legal counsel on antitrust regulatory matters. UBS Investment Bank will be the sole arranger on the bridge financing to Walgreens Boots Alliance.


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