Rite Aid Secures Regulatory Clearance to Sell 1,932 Stores & Related Assets for $4.375 Billion to Walgreens Boots Alliance Un...
September 19 2017 - 8:00AM
Business Wire
Hart-Scott-Rodino Waiting Period Expires for
the Proposed Transaction
Rite Aid to Significantly Reduce Debt and
Strengthen Balance Sheet
Rite Aid Corporation (NYSE: RAD) today announced that it has
secured regulatory clearance for an amended and restated asset
purchase agreement with Walgreens Boots Alliance, Inc. (Nasdaq:
WBA) whereby WBA will purchase 1,932 stores, three distribution
centers and related inventory from Rite Aid for an all-cash
purchase price of $4.375 billion on a cash-free, debt-free basis.
Rite Aid also has the option to purchase generic drugs that are
sourced through an affiliate of WBA at a cost substantially
equivalent to Walgreens for a period of 10 years. The
Hart-Scott-Rodino waiting period expired for the proposed
transaction.
Under the amended and restated agreement, Rite Aid will retain
approximately 250 additional stores as compared to the prior
agreement announced between Rite Aid and WBA in June 2017,
resulting in a reduction in the transaction sale price. The
decision to retain these stores follows discussions between Rite
Aid and WBA, as well as the U.S. Federal Trade Commission
(“FTC”).
“Securing regulatory clearance provides us with a clear path
forward to realize the benefits of this transaction. With a
compelling and more profitable store footprint in key markets,
enhanced purchasing capabilities and a stronger balance sheet and
improved financial flexibility, we are well positioned to implement
our plans to deliver improved results," said Rite Aid Chairman and
CEO John Standley.
Standley continued, "I am proud of our entire Rite Aid team for
their extraordinary efforts during this process and their
tremendous dedication to taking great care of our customers and
patients. We are committed to supporting a smooth transition as we
remain focused on delivering a great customer experience, improving
our business and creating value for all of our stakeholders."
The 1,932 stores included in the amended agreement are primarily
located in the Northeast and Southern regions of the United States.
The three distribution centers are located in Dayville, Conn.,
Philadelphia and Spartanburg, S.C. Under the terms of the amended
agreement, Rite Aid will provide certain transition services to WBA
for up to three years after the closing of the transaction.
The transaction has been approved by the Boards of Directors of
Rite Aid and WBA and is still subject to other customary
conditions. Approval of the transaction does not require a
shareholder vote. Rite Aid and WBA expect to transfer ownership of
the stores in phases beginning in October 2017, with the goal of
completing the transfer of all stores in spring of 2018.
Rite Aid expects to use a substantial majority of the net
proceeds from the transaction to repay existing indebtedness which
will improve the company’s leverage levels. Rite Aid also expects
that the gain it will record on the sale of the assets will be
largely offset by its net operating loss carryforwards, resulting
in a minimal cash tax payment on this transaction.
Immediately following the completion of the transaction, Rite
Aid will continue to operate approximately 2,600 stores and six
distribution centers as well as EnvisionRx, its pharmacy benefit
manager, RediClinic and Health Dialog. The company will leverage
the capabilities of these subsidiaries to deliver a higher level of
care in the communities it serves.
Rite Aid Corporation is one of the nation's leading drugstore
chains that currently operates more than 4,500 stores in 31 states
and the District of Columbia with fiscal 2017 annual revenues of
$32.8 billion. Information about Rite Aid, including corporate
background and press releases, is available through the company's
website at www.riteaid.com.
Cautionary Statement Regarding Forward Looking
Statements
Statements in this release that are not historical, are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements include, but are not limited to, statements
regarding the expected timing of the closing of the sale of Rite
Aid stores and assets to WBA; the ability of the parties to
complete the sale and related transactions considering the various
closing conditions; the outcome of legal and regulatory matters in
connection with the sale of stores and assets of Rite Aid to WBA;
the expected benefits of the transactions such as improved
operations, growth potential, market profile and financial
strength; the competitive ability and position of Rite Aid
following completion of the proposed transactions; the ability of
Rite Aid to implement new business strategies following the
completion of the proposed transactions and any assumptions
underlying any of the foregoing. Words such as "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "predict," "project," "should," and "will" and
variations of such words and similar expressions are intended to
identify such forward-looking statements. These forward-looking
statements are not guarantees of future performance and involve
risks, assumptions and uncertainties, including, but not limited
to, our high level of indebtedness and our ability to make interest
and principal payments on our debt and satisfy the other covenants
contained in our debt agreements; general economic, industry,
market, competitive, regulatory and political conditions; our
ability to improve the operating performance of our stores in
accordance with our long term strategy; the impact of private and
public third-party payers continued reduction in prescription drug
reimbursements and efforts to encourage mail order; our ability to
manage expenses and our investments in working capital; outcomes of
legal and regulatory matters; changes in legislation or
regulations, including healthcare reform; our ability to achieve
the benefits of our efforts to reduce the costs of our generic and
other drugs; risks related to the proposed transactions, including
the possibility that the transactions may not close, including
because a governmental entity may prohibit, delay or refuse to
grant approval for the consummation of the transactions, or may
require conditions, limitations or restrictions in connection with
such approvals, the risk that there may be a material adverse
change of Rite Aid, or the business of Rite Aid may suffer as a
result of uncertainty surrounding the proposed transactions; risks
related to the ability to realize the anticipated benefits of the
proposed transactions; risks associated with the financing of the
proposed transaction; disruption from the proposed transaction
making it more difficult to maintain business and operational
relationships; the effect of the pending sale on Rite Aid's
business relationships (including, without limitation, customers
and suppliers), operating results and business generally; risks
related to diverting management's or employees' attention from
ongoing business operations; the risk that Rite Aid's stock price
may decline significantly if the proposed transaction is not
completed; significant transaction costs; unknown liabilities; the
risk of litigation and/or regulatory actions related to the
proposed transactions; potential changes to our strategy in the
event the proposed transactions do not close, which may include
delaying or reducing capital or other expenditures, selling assets
or other operations, attempting to restructure or refinance our
debt, or seeking additional capital, and other business effects.
These and other risks, assumptions and uncertainties are more fully
described in Item 1A (Risk Factors) of our most recent Annual
Report on Form 10-K, and in other documents that we file or furnish
with the Securities and Exchange Commission, which you are
encouraged to read. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated
or anticipated by such forward-looking statements. Accordingly, you
are cautioned not to place undue reliance on these forward- looking
statements, which speak only as of the date they are made. Rite Aid
expressly disclaims any current intention to update publicly any
forward-looking statement after the distribution of this release,
whether as a result of new information, future events, changes in
assumptions or otherwise.
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version on businesswire.com: http://www.businesswire.com/news/home/20170919005842/en/
Rite Aid CorporationINVESTORS:Matt Schroeder,
717-214-8867investor@riteaid.comorMEDIA:Susan Henderson,
717-730-7766
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