If there’s a Rite Aid store in your neighborhood, the odds are about even that there won’t be for long. The Federal Trade Commission has finally approved a deal between the No. 2 and No. 3 drugstore chains in the country, Walgreens and Rite Aid. Instead of acquiring the smaller chain, Walgreens Boots Alliance will buy around half of its stores.
Lucky number four
Three previous versions of this deal didn’t meet FTC approval. The first two were acquisition deals that valued Rite Aid at $9.4 billion and around $7 billion respectively, and Walgreens later made an offer to buy around half of Rite Aid’s stores when it became clear that the FTC wasn’t going to let the merger happen.
In this fourth version, Walgreens will pay $4.38 billion to buy around 42% of its competitor’s stores, with purchases beginning next month. The chain will also buy three distribution centers from Rite Aid to support its new acquisitions, most of which are in the Northeast and the South.
What about competition?
The remaining Rite Aid stores will have the option to join Walgreens in group purchases of generic drugs, a major concern of critics of the deal.
“Walgreens’ acquisition of Rite Aid stores in the revised transaction is limited to areas where competition between the two firms is not significant,” Maureen Ohlhausen, acting chair of the FTC, told Reuters.
The FTC has no official chair and has two commissioners when it is suppose to have five. The other commissioner, Terrell McSweeny, still has some issues with the transaction, telling Reuters that she is “concerned that the transaction could reduce Rite Aid’s long-term ability to obtain low generic drug prices.”
Maybe it doesn’t matter in the long run, which is part of the reason why Rite Aid’s shareholders approved the deal in the first place. In the future, there may simply not be room in the marketplace for a small national drugstore chain alongside CVS and a larger Walgreens.
Instead, national standalone drugstores will compete with remaining independent stores and regional chains, and with the pharmacies inside big-box stores and supermarkets.