Walgreens Boots Alliance agrees to acquire rival Rite Aid for £11.2bn

If approved by regulators, Walgreens Boots Alliance will take ownership of Rite Aid’s 4,600 stores across the US. But Rite Aid, which is the largest drug store chain on the country’s East Coast, is initially expected to continue operating under its own name.

Shares in the Pennsylvania-based business, which formed back in 1962, soared more than 40% yesterday after the Wall Street Journal reported that a deal could be close to completion.

Walgreens Boots Alliance confirmed the agreement today and said Rite Aid shareholders would receive $9 (£5.89) per share as part of the deal. Both retailers said the acquisition should be completed by mid-2016.

It added that it expects to finance the deal “through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt”.

Walgreens Boots Alliance chief executive Stefano Pessina said the acquisition was “another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy”.

Rite Aid boss John Standley added the deal would deliver “significant value” to the firm’s shareholders.

‘Blockbuster’ acquisition

Planet Retail global research director Rob Gregory said the deal would see Walgreens Boots Alliance become the world’s second biggest retailer in terms of sales, behind Walmart. It will leapfrog the likes of Amazon, Tesco, Carrefour and Costco in the process.

Gregory added: “The blockbuster acquisition brings together two of the three largest drugstore operators in the US.

“Despite an ageing US population and its insatiable appetite for lifestyle drugs to manage chronic illnesses, as well as the impact of the Affordable Care Act, drug price inflation, mail order and internet pharmacies are depressing margins.

“Clearly, improved scale will give improved buying and negotiating power, as well as clear efficiencies in a range of areas, such as private-label developments and logistics.”

Gregory also suggested that Walgreens Boots Alliance could target further acquisitions if the deal is given the green light.

“Looking to the future, further moves globally cannot be ruled out,” he said. “Walgreens Boots Alliance still only has a limited presence in Asia and Latin America, so acquisitions of local and regional players in these regions will help establish the retailer’s global scale and ambitions.”