Walgreens Boots Alliance Inc WBA‘s proposed acquisition of smaller rival Rite Aid Corporation RAD was unlikely to receive regulatory approval unless it were to divest hundreds of stores to ease competitive concerns.
Fred’s, Inc. FRED, a relatively small pharmacy chain, in late 2016 said it will buy 865 stores and certain assets from Walgreens and Rite Aid in a deal valued at $950 million. The deal would have transformed Fred’s to become the third-largest drugstore chain in the U.S. and sent shares soaring by 80 percent.
So Now What?
Rite Aid’s announcement on Thursday that it will only sell 2,186 stores to Walgreens and continue operating its remaining stores as a standalone entity implies any prior agreements made with Fred’s are now off the table.
Fred’s confirmed in a press release that all asset purchase agreements has been terminated and it will receive $25 million as reimbursement for expenses associated with the termination.
Fred’s CEO Michael Bloom said in the press release that the outcome is disappointing and was viewed as a “potential outcome that would accelerate our transformation,” but “not define it.”
The outcome of the transaction will also have no impact on the company’s ability to execute or transformation strategy, the executive added.
“We are as confident as ever that we have a strong team and the right strategy in place to drive long-term growth and profitability, and to enhance value for our shareholders,” Bloom added. “We are excited about what we have accomplished and are optimistic about the future.”
Fred’s stock was down more than 19 percent to $9.90 in pre-market trading.