Friday, September 22, 2017

Walgreens to Purchase Rite Aid Stores

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Walgreens has finally received approval to acquire 1,932 Rite Aid stores, three distribution centers and inventory for $4.375 Billion in cash.  This acquisition will leave Rite Aid with 2,600 stores and thus, be one of the three remaining nationwide chain pharmacies together with CVS and Walgreens.  Walgreens will now be able to negotiate with drug manufacturers for lower drug costs, providing competition for CVS

The Rite Aid store purchases will begin in October and should be completed in the Spring of 2018 followed by rebranding those stores to Walgreens.  Most of the stores to be purchased are located in the Northeast and Southern United States.  As a result, Walgreens will have close to 10,000 locations (CVS has more than 9,600 stores) and expects to save about $300 Million annually through cost cuts over the next four years.   Walgreens also owns Duane Reade pharmacies .

It will be interesting to watch what happens to Rite Aid in the future as their stock plummets.    The deal does include the option for Rite Aid to join the Walgreens group purchasing  agreement for discounts on generics, which should help them to compete with the other chain pharmacies.

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