On Tuesday, Walgreens Boots Alliance stated that it intends to purchase Rite Aid for $17.2 billion in cash (including net debt), a move aimed to massively strengthen its influence and negotiation capacity with pharmacy benefit managers as well as drug producers.

National regulators are bound to analyze the transaction, as retail pharmacy mergers could lead to a very small number of chains sharing the market.

Thanks to the healthcare politics of president Obama, the Affordable Care Act is in full swing. One consequence of it is that big names from the pharmaceutical industry chose to join forces. Another effect of the Obamacare is that more Americans are insured, which upped the demand for prescriptions. Only last year, this led to a seven percent spike in pharmacies' profits, year to year.

"Today's announcement is another step in Walgreens Boots Alliance's global development," Walgreens CEO Stefano Pessina, declared.

Walgreens has a tradition of growing by acquiring smaller companies. Names such as USA Drugs, Kerr Drug and Duane Reade were recently welcomed under the Walgreen umbrella, which allowed the corporation to own around 8,200 stores and bank $76 billion last year. The purchase of Rite Aid brings boosts Walgreens's trove with an extra 4,600 stores in 31 states.

By comparison, CVS Health, the largest chain of drugstores by market cap, runs around 7,800 stores.

"This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients. 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," added Pessina.

In turn, this will directly reflect into better prices for customers who purchase prescriptions.

Even after the deal is closed, Rite Aid will still keep its own brand name, but will become a wholly owned subsidiary of Walgreens.

Due to the scale of the transaction, antitrust scrutiny is expected.

Jeffrey S. Spigel, a specialist in antitrust law firm King & Spalding, affirms that special attention will be focused on geographical locations where Rite Aid and Walgreens are in competition with each other. This means that in respect to regulations, only one of the two brands names should be present in some areas.

Spigel further pointed out that The Federal Trade Commission promised deeper scrutiny on the means by which clients purchase prescriptions and pharmacy items.

"I expect that the companies will argue that the competition is now broader than just the Rite Aids, Walgreens and CVSs of the world," he mentioned.

After news broke out regarding the transaction between the two pharmaceutical companies, Rite Aid's stock surged and closed the day at $8.67, marking a near 43 percent rise in value.

Walgreens stated that the deal will be financed through a mixed bag of measures including cash, deleting existing debts of Rite Aid and opening of crediting lines.

Leading to the merging process, Rite Aid received council from Citigroup for financing and from Arps, Slate, Meagher & Flom and Jones Day for legal issues.

UBS offered financial know-how to Walgreens and is the only institution that will manage the banking part of the deal, while legal matters were handled by Simpson Thacher & Bartlett and Weil, Gotshal & Manges.

Walgreens acquiring Rite Aid may prove to be a substantial step forward towards affordable pharmaceutical shopping and the number of real stores adds to the human factor value that over-the-Internet purchasing currently lacks.

ⓒ 2024 TECHTIMES.com All rights reserved. Do not reproduce without permission.
Join the Discussion