Acquisition: Rite Aid Is Right for Walgreens

Ten months ago Walgreens established a global footprint by acquiring European pharmacy retailer Alliance Boots. Now parent company Walgreens Boots Alliance has made a bold move inside the U.S. by agreeing to acquire Camp Hill, PA-based retail pharmacy chain Rite Aid.The deal, announced on Oct. 27 and expected to close in the second half of 2016, would give Walgreens Boots Alliance nearly 13,000 stores in the U.S. (Official counts in February 2015 gave Walgreens 8,232 stores in the U.S., Puerto Rico and the U.S. Virgin Islands, while Rite Aid had 4,570 in 31 states.)"Today's announcement is another step in Walgreens Boots Alliance's global development and continues our profitable growth strategy," Stefano Pessina, Walgreens Boots Alliance executive vice chairman and chief executive officer, said in a media release. "Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online."Rite Aid would become a wholly owned subsidiary of Walgreens Boots Alliance and is expected to initially operate under its existing brand name, according to the release. Decisions will be made over time regarding the integration of the two companies. Among the challenges will be Rite Aid's coalition loyalty program, Plenti, as Walgreens has a well-established program called Balance Rewards."Joining together with Walgreens Boots Alliance will enhance our ability to meet the health and wellness needs of Rite Aid's customers while also delivering significant value to our shareholders," Rite Aid chairman and ceo John Standley said in the release. "This transaction is a testament to the hard work of all our associates to deliver a higher level of care to the patients and communities we serve. Together with Walgreens Boots Alliance, the Rite Aid team can continue to build upon this great work through access to increased capital that will enhance our store base and expand opportunities as part of the first global pharmacy-led, health and wellbeing enterprise."Beyond Alliance Boots, Walgreens' acquisition history includes Duane Reade (2010), Drugstore.com (2011), USA Drug (2012) and Kerr Drug (2013).Walgreens Boots Alliance's Retail Pharmacy USA division (comprising Walgreens and Duane Reade stores) had total sales of $81.0 billion in fiscal 2015, which ended Aug. 31, 2015. Rite Aid had $26.5 billion in sales during fiscal 2015, which ended Feb. 28, 2015.Citing research firm IBISWorld, USA Today reported that drugstore rival CVS Health makes up nearly three-fifths of the retail pharmacy market in the U.S., with Walgreens taking up about one-third and Rite Aid about 10% of the market. As of Dec. 31, 2014, there were 7,822 CVS/pharmacy stores in 47 states and Washington, DC, 20 in Puerto Rico and 47 in Brazil.Sana Jafrani and Linc Wonham contributed to this report.

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