Walgreens and Rite Aid want to merge and become the largest pharmacy chain in the country, and the Federal Trade Commission is the main obstacle in their path. That’s why Walgreens, the much larger partner in this merger, is preparing a new proposal for the regulators, which would include selling off more stores to what’s now a small regional chain.
The last version of the deal, presented to the FTC right on the merger deadline, cut the value of Rite Aid by as much as $2 billion and proposed selling off up to 1,200 stores to Fred’s Inc., a discount drug chain with stores mainly in the South.
“People familiar with the talks” told Bloomberg News that the companies are finishing up a new version of the deal, which would increase the number of stores that would go from Walgreens and Rite Aid to Fred’s.
The smaller chain would reportedly be allowed to keep using the Rite Aid name for two years, and would also get distribution centers and even executives from Rite Aid to help keep the place running if it takes over more than 1,000 new stores.
Supporting Fred’s and making sure that it stays in business will be important if the FTC does approve the transaction. When Hertz acquired Dollar Thrifty and Albertsons acquired Safeway, they were required to divest locations to competitors. Those companies both failed after the divestiture, with supermarket chain Haggen and spun-off Advantage Rent A Car both filing for bankruptcy.
The FTC is currently short-handed, with only two seats on the Commission currently occupied, and no chair named. They’ll need to be nominated by the President and confirmed by the Senate, so it could be a mini-FTC that evaluates the Walgriteaid deal if the partners submit it in the next few weeks.
If it feels like this merger has been dragging on, it has. The two companies first announced their betrothal in October of 2015.