How are things going with Walgreens and Rite Aid, who are still working on their planned merger to become the largest drugstore chain in the United States? In its annual report, Rite Aid reports that the merger is on track, and consumers can expect to have fewer drugstore choices soon, as around 3,300 Rite Aid stores change to Walgreens or close.
In its annual report this week, Rite Aid explains that based on its discussions so far with the Federal Trade Commission, the company expects that at least 1,200 Rite Aid stores will be sold to Fred’s, a pharmacy chain now based mostly in the South, to satisfy the FTC. That will mean the lowest possible price for Rite Aid’s shareholders, $6.50 per share.
The companies had already agreed to the sale of 865 Rite Aid stores for $950 million, and will have to negotiate a new sale agreement if the FTC requires that 1,200 or more be sold to approve the merger.
This divestment is a great opportunity for Fred’s to go national, but is ultimately not all that great for consumers. To at least try to preserve some competition, the FTC requires merging businesses to sell some of their locations to a competitor in areas where they overlap.
Remember that the point of a merger like this is to increase profits by giving drug companies and pharmacy benefit managers fewer chains to negotiate with, giving consumers fewer pharmacy chains to choose from.
Rite Aid now has 4,536 stores. While some of those will become part of the expanded Fred’s chain, around 3,300 will become Walgreens stores or close.