As it struggles to sell off between 500 and 1,000 of its drugstores in an effort to satisfy antitrust regulators, Walgreens has extended its merger agreement end date with Rite Aid by an extra three months, from October 27, 2016 to January 27, 2017.
The pending $9.4 billion acquisition — which rises to $17.2 billion including debt — initially was agreed upon in October 2015. Since then the deal has been under tight review from the Federal Trade Commission (FTC) due to the chains' combined footprint of 13,000 total pharmacies.
Kroger had expressed interest in buying as many as 650 Walgreens stores, but reportedly reneged on the deal after the FTC said the grocery giant would not have the option to close and integrate Rite Aid stores that are near Kroger locations. No other potential buyers have publicly come forward with interest in the locations.
Despite the deal remaining up in the air for the time being, Walgreens Boots Alliance continues to forecast that the transaction will close in early calendar 2017. The most likely outcome will be that the parties will be required to divest between 500 and 1,000 stores.
Lost amid the acquisition speculation is that Walgreens released its Q4 and full-year earnings report, showing mixed results. Sales increased 0.4% to $28.6 billion in the quarter, but climbed 13.4% to $117.4 billion when taking the whole year into account. The drugstore’s U.S. retail pharmacy division had Q4 sales of $20.7 billion, an increase of 4% over Q4 2015 totals. Comparable store sales increased 3.2% within the same timeframe.
Walgreens also is undergoing a massive cost reduction initiative following last year’s Alliance Boots acquisition. The retailer is aiming to cut $1.5 billion in costs by the end of its fiscal year in August 2017, including closing approximately 200 stores and reorganizing operations, among other measures.
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