Walgreens-Rite Aid Merger Stalls Amid FTC Review
Walgreens Boots Alliance said on Friday it would not comment on reports that the Federal Trade Commission may take longer to approve its acquisition of Rite Aid. Bloomberg News was first to report that “FTC lawyers aren’s sold on Walgreens' proposal to sell 865 drugstores to Fred’s, Inc.” Bloomberg cited two people who asked the news organization not to be identified. To satisfy antitrust concerns, Walgreens and Rite Aid in December said they would sell 865 Rite Aid stores to Fred’s Pharmacy for $950 million.
Total Retail's Take: This situation is beginning to unfold much like the proposed Staples-Office Depot merger that the FTC rejected because of antitrust concerns. Walgreens has made concessions to try and silence critics who argue its merger with Rite Aid would be an antitrust violation — including selling 865 Rite Aid stores to Fred's Pharmacy — but apparently not enough has been done. In its eagerness to compete with CVS, Walgreens viewed its purchase of Rite Aid as a competitive differentiator, increasing its national store footprint — already the No. 1 U.S. drugstore operator by store count — while also enabling it to better negotiate for lower drug costs. It will be interesting to see if the deal gets approval. Either way, the FTC's decision figures to have a profound impact on the drugstore industry.