Walgreen Agrees To Buy Rite Aid In A $17.2 Bln Deal

(RTTNews) - Drugstore chain Walgreens Boots Alliance Inc. (WBA) on Tuesday said it will acquire smaller drugstore chain Rite Aid Corp. (RAD) for $9 a share, thus merging the second- and third-largest drugstore chains in the U.S.

Shares of Rite Aid slipped more than 6 percent in the extended trading session after reports of the possible deal had pushed its stock up over 42 percent in regular trading.

The company said the purchase price represents a premium of 48 percent to the closing share price on October 26, the day before the agreement was signed.

The total deal values Rite Aid at about $17.2 billion, including debt. Rite Aid has a hefty debt of $7.4 billion as of August.

"Today's announcement is another step in Walgreens Boots Alliance's global development and continues our profitable growth strategy. In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, wellbeing and beauty products and services," said Walgreens CEO Stefano Pessina.

The deal has been approved by boards of both companies and now requires customary approvals. The deal is expected to close in the second half of calendar 2016.

The deal is expected to be accretive to Walgreens' adjusted earnings in its first full year after completion. Additionally, Walgreens expects to realize synergies in excess of $1 billion.

Walgreens plans to finance the transaction through a combination of existing cash, assumption of existing Rite Aid debt and issuance of new debt.

Rite Aid has about 4,600 drug stores in 31 states, according to the company's website.

RAD closed Tuesday's trading at $8.67, up $2.59 or 42.60%, on the NYSE. The stock, however, dropped $0.60 or 6.92% in the after-hours trade.

WBA closed Tuesday's trading at $95.16, up $5.68 or 6.35%, on the NYSE. The stock further gained $0.84 or 0.88% in the after-hours trade.