Walgreens Boots Alliance (WBA) and Rite Aid announced on Tuesday that the companies will be selling 865 stores to Fred’s Pharmacy for $950 million in all cash.
If approved, Fred’s Pharmacy would become one of the largest drugstore chains in the United States. The combination would leave around 12,000 store locations.
“The agreement is being entered into to respond to concerns identified by the [Federal Trade Commission] in its review of the proposed acquisition of Rite Aid by Walgreens Boots Alliance, which was announced in October 2015,” WBA and Rite Aid said. “Walgreens Boots Alliance is actively engaged in discussions with the FTC regarding the transaction and is working toward a close of the Rite Aid acquisition in early calendar 2017.”
Walgreens Boots Alliance CEO Stefano Pessina said, “We are pleased to have found an experienced pharmacy operator for these stores.”
“With this agreement, we are moving ahead with important work necessary to obtain approval of our acquisition of Rite Aid. We look forward to continuing to provide our customers and patients with the highest level of care and attention,” he continued.
Walgreens merged with Alliance Boots two years ago and planned to buy Rite Aid in October 2015 for $9.5 million, but the FTC expressed concern. The FTC was concerned about merging the world’s largest pharmacy chain with Rite Aid stores.
The purchase of the stores would also come with certain assets associated with the stores that are related to store operations. The contract also plans to continue to employ all store associates and certain field and regional associates related to the operations of the store.
The stores would continue to operate as Rite Aid until the transition is complete.
According to Walgreens, the savings accrued from the merging will total more than $1 billion in just the first three to four years after the merge.
Fred’s is looking to shift its business approach more towards “personal healthcare,” according to the company.
“This will be a transformative event for Fred’s Pharmacy that will accelerate our healthcare growth strategy,” said Fred’s CEO Michael Bloom.
According to the company’s website, there are 370 “full-service pharmacy departments located within Fred’s stores.”
Fred’s has been in business since 1947 and primarily competes against other discount, dollar store chains.
Fred’s only had $5.7 million in cash, but has secured an additional $1.65 billion in borrowings to fund the $950 million all-cash purchase of the stores.