Walgreens-Rite Aid deal still waiting for approval

The much anticipated approval for the Walgreens/Rite Aid merger, through which Walgreens has proposed to pay $9.4 billion for the acquisition of Rite Aid's 4,547 stores in an effort to bolster its national footprint, did not happen by Friday morning as many had speculated.



Now there is a new countdown clock — the deal is set to expire Jan. 27 if not approved before that time.



"[The decision] won’t happen [on Inauguration Day]," confirmed Betsy Lordan, senior public affairs specialist for the Federal Trade Commission in an email to Chain Store Age sister publication, Drug Store News. "More generally, however, we do not confirm or comment on merger investigations until/unless we are announcing legal action such as a complaint or (in some cases) a complaint and proposed settlement."



Many experts hold to the belief that a Federal Trade Commission operating under a Republican administration will be "big-business" friendly and therefore more likely to approve the deal. In an early December research note published the week before the announcement that Fred's would acquire 865 divested Rite Aid stores, Leerink managing director David Larsen wrote, "With Trump as President we believe the FTC will be more willing to work with Walgreens Boots Alliance and potential buyers of Rite Aid stores in order to allow the transaction to close."



But that's not necessarily the case, cautioned Scott Muskin, managing director and senior retail analyst for Wolfe Research, especially given the nonconformist stance President Trump has taken on many issues. "The historical context here doesn't matter because Trump has shown himself to be somewhat anti-merger," he told DSN. "He's going to look at it more on the merit [of the deal]," he said. "While we continue to view the transaction as a major win for Walgreens Boots Alliance shareholders, we also continue to have some doubts that the transaction will be approved."



So what happened? Why wasn't the deal approved before Jan. 20?



Analysts who follow Walgreens Boots Alliance speculate that discussion around rationalizing the Rite Aid store base post merger may have given regulators pause. "We were surprised to hear Walgreens Boots Alliance mention that store base rationalization may be a potential post-acquisition strategy given that that acquisition is still undergoing FTC review," commented Barclays analyst Eric Percher. Percher noted, however, Walgreens Boots Alliance CEO Stefano Pessina is still very bullish on the deal. "Management is very confident of FTC approval," Percher wrote, noting that Pessina acknowledged there is no ‘Plan B’ necessarily should the deal fall through.”