The acquisition of 865 Rite Aid stores would create the third-largest drugstore chain in the US and a competitor in the channel on a national scale. Fred’s Pharmacy’s current door count is 647 across 15 states; the acquisition will bring the total door count to 1,512 stores. The transaction is expected to close after the completion of the Walgreens Boots Alliance’s proposed $9.4 billion acquisition of Rite Aid.
WHO: Memphis-based Fred’s is a chain of 647 stores in 15 states with 317 stores operating full- service pharmacies. The stores are best described as a hybrid of discount dollar stores and drugstores.
WHY: Divesting of stores could pave the way for the Walgreens Boots Alliance to finalize the Rite Aid transaction which was delayed in October over anti-trust concerns. The addition of the 865 Rite Aid stores could allow Fred’s to expand more deeply into the beauty category and allows for potential growth into other markets where Rite Aid operates.
IN THEIR WORDS: Fred’s Pharmacy Chief Executive Officer Michael K. Bloom commented, “This will be a transformative event for Fred’s Pharmacy that will accelerate our healthcare growth strategy through our acquisition of 865 new stores located in highly attractive markets. We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members. We look forward to realizing the considerable benefits this transaction will bring to our customers, patients, payors, supplier partners, team members and shareholders.”
- Fred’s signed an agreement with Walgreen’s Boots Alliance, Inc. and Rite Aid Corporation to purchase 865 stores and certain assets related to store operations for $950 million in cash.
- Fred’s Pharmacy expects that the acquired stores would be accretive to earnings and generate substantial cash flow.
- Fred’s Pharmacy will continue to employ, contingent on consummation of the transaction, store and certain field and regional team members related to the operations of the acquired stores. Upon completion of the acquisition, the company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.
- A.T. Kearney served as a strategic advisor to the CEO and Board of Directors and provided financial and operational diligence related to the transaction.
- BofA Merrill Lynch and Regions Bank have committed to provide financing to Fred’s Pharmacy.
- Peter J. Solomon Company, LLC provided a fairness opinion to the Board of Directors of the company in connection with the transaction.
Read the full press release on Business Wire.