After 15 months of negotiations, Walgreens Boots Alliance has given up on the deal to buy drugstore rival Rite Aid. Instead, Walgreens’ counteroffer would have Rite Aid sell 2,186 stores and three distribution centers to Walgreens for $5.175 billion. The new deal also terminates Walgreens previous $950 million agreement to sell 865 Rite Aid stores to Fred’s Pharmacy, an outcome that Fred’s CEO Michael Bloom deemed “disappointing.”
Earlier this month, the Federal Trade Commission (FTC) expressed doubts about the Walgreens-Rite Aid deal, and even recommended the agency file a lawsuit to block it. The FTC staff was not convinced that Fred’s would be able to fill in the competition gap with the Rite Aid sale.
The original merger has faced multiple hurdles since negotiations began in October 2015. Walgreens agreed to acquire Rite Aid for $49 per share, equaling approximately $9.5 billion. A year later, the two companies extended the completion deadline from Oct. 27, 2016 to Jan. 27, 2017. It was then pushed back again to July 31, 2017, because the FTC reportedly was not satisfied with the companies’ efforts toward gaining antitrust approval. At the same time, the companies’ agreed to lower the price of the deal by at least $2 billion.
“We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction,” said Stefano Pessina, Walgreens CEO in a statement. “It will allow us to expand and optimize our retail pharmacy network in key markets in the U.S.”
After the announcement, CNBC reported that Rite Aid’s shares fell by 17%, while Walgreens’ shares were up by 4.4%. Fred’s shares also fell, by 27%.