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Walgreens Willing To Divest 1,000 Stores To Complete Rite Aid Deal

Walgreens Boots Alliance is willing to divest as many as 1,000 stores to win regulatory approval of its $17.2 billion bid to acquire Rite Aid, according to an SEC filing the drugstore chain reported on Oct. 29, 2015. The combined company would have more than 12,700 U.S. stores before the divestiture, approximately 500 more than the pharmacy with the second-most stores, CVS Health.

While the Boards of Directors of both pharmacies have approved the transaction, it still requires approval from the companies’ shareholders and the Federal Trade Commission. Two U.S. senators, Amy Klobuchar of Minnesota and Mike Lee of Utah, already have publicly called for an examination into the acquisition, questioning whether the deal would potentially raise drug prices for consumers and reduce choice.

“I have fought tirelessly to promote competition in the health sector and I believe the proposed merger of two of the three largest drugstore chains in the country raises serious issues,” Sen. Klobuchar, the top Democrat on the Senate Judiciary Committee’s antitrust subcommittee, said in a statement.

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The document reveals that the merger agreement between Walgreens Boots Alliance and Rite Aid must close by Oct. 27, 2016, or the deal will be terminated. However, this deadline could potentially be extended to Jan. 27, 2017. The transaction is expected to close in the second half of 2016.

In the event that Rite Aid walks away from the deal at any time, the company will forfeit a $325 million termination fee to Walgreens. Rite Aid may also be required to pay up to an additional $45 million to cover expenses incurred by Walgreens.

On the other hand, Walgreens will forfeit $325 million to Rite Aid if it is not able to secure regulatory approval of the deal, a figure that could double to $650 million if Walgreens enters into, consummates or announces certain acquisitions within seven to 12 months of the date of the merger agreement.

 

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