Fred's Could Help Rite Aid/Walgreens Deal Go Through
The chain has said it remains committed to buying Rite Aid stores.
Despite Federal Trade Commission delays on the Walgreens-Rite Aid merger, Fred’s Pharmacy plans to move ahead with its purchase of up to 1,200 Rite Aid stores.
On December 20, Fred’s signed an agreement with Walgreens Boots Alliance, Inc. and Rite Aid to purchase 865 stores for $950 million in cash, a move that is expected to convince FTC to approve the Walgreens-Rite Aid merger.
In January, Walgreens Boot Alliance and Rite Aid Co extended their previous merger agreement six months. The new agreement requires the merged company to divest itself of up to 1,200 Rite Aid locations, rather than 1,000, along with certain other assets, so that it can obtain regulatory approval. The extension-until July 3-should allow the parties to obtain the needed regulatory approval.
Related article: Walgreens/Rite Aid Merger Amended and Extended
“Fred’s Pharmacy is working collaboratively with Walgreens Boots Alliance, Rite Aid, and the FTC to help obtain the FTC’s approval of Walgreen Boots Alliance’s pending acquisition of Rite Aid and the divestiture of certain Rite Aid assets to Fred’s Pharmacy,” Fred’s said in a statement announcing its 2016 earnings results.
“Fred’s Pharmacy remains committed to purchasing additional assets, including up to 1,200 Rite Aid stores, to the extent necessary to obtain the FTC’s approval of the transaction.”
Fred’s currently has 651 stores. The additional stores it gains in this deal would make it the third largest drugstore chain in the United States.
The Rite Aid stores are based in highly attractive markets, according to Fred’s. The acquisition is a “transformative event that will add substantial scale to the company and transform Fred’s Pharmacy, the largest regional pharmacy player, into an even stronger competitor and the third-largest drugstore chain in the nation [behind Walgreens and CVS Health],” the company said.
In addition, the acquisition will “accelerate the company’s health-care growth strategy, generating considerable benefits for our customers, patients, payers, supplier partners, team members, and shareholders.”
In fiscal year 2016, Fred’s reported a net loss of $66.5 million or $1.80 per share, compared with a net loss of $7.4 million or $0.20 per share for fiscal year 2015.
The pharmacy chain’s net sales for fiscal 2016 also declined 1.2% to $2.13 billion, and comparable store basis dropped 2.2% for fiscal year 2016. “Comparable store sales for the year included a negative 1.7% impact as a result of the sale of low productive discontinued inventory versus the prior year,” the retailer said.
