Walgreens to acquire rival Rite Aid for $17.2B in cash

Walgreens Boots Alliance Inc agreed to acquire Rite Aid Corp for $17.2 billion in cash to further expand the company's role in the distribution of medications in the U.S.

The deal will combine two of the three biggest pharmacy companies in the Atlanta market and the U.S., and will create a drugstore giant with nearly 18,000 stores around the world.

According to The Wall Street Journal, Walgreens agreed to pay $9 a share in cash for Rite Aid, offering 48% of premium to Rite Aid's closing.

When the companies were about to close the deal, Rite Aid's shares rose 43% to $8.67 and Walgreens' shares rose 6.4% to $95.16.

Right after the acquisition was made public, Bloomberg noted that Rite Aid's shares fell 7.8% to $7.99, below Walgreens' offer of $9 a share.

Walgreens Boots Alliance was created last year when UK High Street chemist Alliance Boots merged with the US drugstore Walgreens. The combination created Walgreens Boots Alliance Inc which runs more than 13,200 stores and 350 distribution centers in 11 countries.

Acquiring Rite Aid will give Walgreens additional purchasing power in negotiating prices with drug companies. It will also help Walgreens lower price for its customers for its most prescriptions would put in a better position in talks with drug providers.

The deal will also give Walgreens the chance to seize the business of managing drug benefits for insurers and employers. That business was owned by Rite Aid when it acquired Envision Pharmaceutical Services Inc for $2 billion this year.

On the other hand, Rite Aid's stock fell 29% since last month after the forecast on lowering profit and revenue this year. This makes a good opportunity for Walgreens to make an offer.

Rite Aid has 4,600 drugstores in 31 states and the District of Columbia. The company has struggled on its business for years by cutting costs, closing some stores and revamping others.

Rite Aid's market value is much smaller than Walgreens. Rite Aid had revenue of $26.5 billion in the fiscal year ended in February while Walgreens had revenue of $76.4 billion n the fiscal year ended in August 2014.

Walgreens Boots Alliance Executive Vice Chairman and CEO Stefano Pessina said about the acquisition, as reported on Atlanta Business Journal, that its another step in the Walgreens' global development and continues the company's profitable growth strategy.

Pessina said that the company's approach is to advance and broaden the delivery of retail health, well-being and beauty products and services in both mature and new markets across the world.

He added that the merger will further strengthen Walgreens' commitment to making quality healthcare accessible to more customers and patients.