Walgreens Boots Alliance, the parent company of Walgreens, may have to divest between 500 and 1,000 of its stores in order to gain regulatory approval for its acquisition of competitor Rite Aid, according to documents the drugstore chain filed to the SEC on Sept. 8, 2016.
Should the $9.41 billion deal be approved, the joint companies will have a 12,000+ store count, making the largest drugstore chain in the country even bigger. Combining two of the three largest pharmacies (based on store count), Walgreens Boots Alliance would have greater negotiating power with drug manufacturers in terms of purchasing and price setting, making the deal a concern for the Federal Trade Commission (FTC).
But Walgreens Boots Alliance was merely the tipping point for the FTC. CVS Health acquired Target’s entire pharmacy business in Dec. 2015 in order to expand its footprint within 20% more store locations, there is contemplation that the pharmacy industry will eventually become a two-horse race, leading to less competition in the space, higher prices and restricted access to certain prescription drugs.
Despite the continued back-and-forth between the drugstores and the FTC, Walgreens believes the acquisition will close in the second half of 2016.
Although there isn’t any indication of which stores may be sold, Walgreens Boots Alliance reported that both Walgreens and Rite Aid “remain actively engaged” with the FTC regarding its review of the pending acquisition.
This wasn’t the first time this year that the FTC has expressed concern over a major retail merger. A U.S. district court judge shot down Staples’ proposed $6.3 billion merger with Office Depot after the FTC filed an injunction request concerning the fact that the combined company would have handled all of the Fortune 1000’s office supply contracts.