Walgreens Boots Alliance Inc (NASDAQ:WBA) has announced that it is willing to comply with the condition to let go of more than 1,000 stores if that is what it takes for its acquisition deal with Rite Aid Corporation (NYSE:RAD) to go through.
Walgreens revealed the deal worth $9.41 billion about a week ago. The drug store chain operates 8,100 stores in the US will acquire Rite Aid, which is the third biggest chain with 4,600 stores all over the country. Walgreens expects the acquisition to strengthen the company’s presence in Southern and Northern California as well as providing significant benefits accrued due to the larger size. One of the economies of scale includes saving up to $1 billion due to more efficiency.
The bigger operating capacity and presence will provide the company with more bargaining power with its drug manufacturers. The two firms believe that the amount benefits heavily outweigh the little risk associated with the acquisition. An efficient blend of synergy will provide the much-needed momentum to strengthen the conglomerate in numerous areas. The deal will also be a great advantage for the conglomerate to handle the competition.
Once the deal is complete, it will give birth to a massive drug store conglomerate with more than 12,600 locations in the US alone. It will be bigger regarding store count than CVS Health Corp (NYSE:CVS) which currently has 8,000 stores. However, CVS also has a pending acquisition deal with Target Corporation (NYSE:TGT). CVS will operate a total of 10,000 stores once the deal is complete, but not enough to match up with the 12,600 stores that Walgreens will operate upon the completion of the Rite Aid deal.
Though the company is expected to let go of 1,000 stores, there is a likelihood that it will only part with 500 stores. However, the company claimed that it is ready to sell the initial number of stores because the Rite Aid deal is a much better alternative. Bloomberg states that here are about 70,000 pharmacies in the country. Walgreens, Rite Aid, and CVS occupy a third of the market. The Walgreens and Rite Aid acquisition deal is expected to close in 2016.
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