In order to meet regulatory requirements for a pending $9.4 billion merger, Walgreens Boots Alliance and Rite Aid announced an agreement to sell 865 Rite Aid locations.
The decision, The Wall Street Journal reported, will leave the two brands with a proposed combination of a little under 12,000 stores.
According to WSJ, a regional retail chain called Fred’s secured $1.65 billion in borrowings to fund the all-cash $950 million purchase, plus ongoing operating costs. In order receive to loans, Fred’s reportedly pledged nearly all of its assets as collateral, which includes real estate, furnishings and prescription files.
“We got a very good price on these stores,” Fred’s Finance Chief Rick Hans commented.
The purchase is expected to more than double the company’s size and saw the shares of the business surge 85 percent to $20.75 in Tuesday (Dec. 20) afternoon trading.
Since the Walgreens/Rite Aid merger is on track to create the largest drugstore operation in the U.S. with 46 percent market share, the companies are under increased pressure from antitrust regulators.
In September, Walgreens reported having a tough time selling off the stores it needed to before the merger with Rite Aid could be finalized.
Walgreens Boots Alliance was told it must either sell off or close down up to 1,000 stores (the exact count is actually 650), but the retailer was struggling to find buyers. NY Post reports indicated that private equity was taking a pass because the locations up for sale didn’t rank as high-quality prospects.
CVS and Walgreens met jointly with the FTC to explore the possibility of CVS picking up a few stores in areas where it is not in direct competition with Walgreens, though sources report Walgreens preferred to sell the whole allotment to a single buyer if possible.