Walgreens to buy Rite Aid for $9.41 billion

Speculation that Walgreens would pursue Rite Aid rose to a crescendo in March after billionaire Stefano Pessina, who took over in January as interim chief executive officer at Walgreens after it acquired Alliance Boots, said he envisioned doing his next big deal in the U.S.

Walgreens, which also reported better-than-expected quarterly profit and sales on Wednesday, said it expects to save more $1 billion from the Rite Aid deal.

In making the announcement after the markets closed, Walgreens said it agreed to pay $9 a share for Rite Aid, a 48% premium to Rite Aid’s closing stock price Monday.

The cash deal of $9 per share is worth $17.2 billion and includes acquiring the debts.

“The combination of Walgreens and Rite Aid creates a further opportunity to deliver a high-quality retail pharmacy choice for USA consumers in an evolving and increasingly personalized healthcare environment”, Walgreens said in a news release.

If Walgreens is able to add the 4,600 Rite Aid stores, it could help Walgreens lower prices for its customers due to the growing volume of prescriptions. That amounts to about 64 percent more than the next largest competitor, CVS, not counting that company’s still-evolving partnership with Target.

For the year, the company posted net earnings of $4.2 billion, an increase of more than 118% over its fiscal year 2014 performance.

The company is fresh off tying the knot with Switzerland-based Alliance Boots, which owned British drugstore chain Boots and a drug-distribution business in Europe.

Walgreens shares fell 0.38 percent to $94.80 in pre-market trading.

Rite Aid will still operate under its own name, but that could change in the future, Pessina said.

Citi acted as Rite Aid’s exclusive financial adviser, with Skadden, Arps, Slate, Meagher & Flom LLP acting as its legal counsel on transaction legal matters and Jones Day acting as its legal counsel on antitrust regulatory matters. The company also is remaking stores to focus more on beauty products.

But Walgreens still relies on prescriptions for about two-thirds of its sales at US stores. According to information provided by Zacks, Walgreens Boots Alliance, Inc.is next expected to issue their earnings report on or around 2015-10-28.

The transaction has been approved by both companies’ boards, and is subject to approval by Rite Aid common stock holders as well as other customary conditions.