Walgreens Boots Alliance’s $5.175 billion Acquisition of Rite Aid Corporation 2,186 stores and three distribution centers

Skadden is advising Rite Aid Corporation on the transaction

The consideration for the transaction will be $5.175 billion in cash, the assumption by Walgreens Boots Alliance of the related real estate leases and the grant of an option to Rite Aid, exercisable through May 2019 and subject to certain conditions, to become a member of Walgreens Boots Alliance’s group purchasing organization, Walgreens Boots Alliance Development GmbH. Walgreens Boots Alliance will also assume certain limited store-related liabilities as part of the new transaction.

This new agreement replaces the previous merger agreement with Rite Aid, announced in October 2015 and amended in January 2017, and the agreement to divest certain Rite Aid stores to Fred’s, Inc. announced in December 2016. Both of these agreements have been terminated, and Walgreens Boots Alliance will pay Rite Aid the $325 million termination fee with respect to their merger agreement.

The new transaction is subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. The initial closing of the new transaction is expected to occur within the next six months.

Upon the initial closing of the new transaction, Walgreens Boots Alliance will begin acquiring the stores and related assets on a phased basis over a period of approximately six months, and intends to convert acquired stores to the Walgreens brand over time.

Walgreens Boots Alliance expects the new transaction to be modestly accretive to its adjusted diluted net earnings per share in the first full year after the initial closing of the new transaction, and expects to realize synergies from the new transaction in excess of $400 million. These synergies are expected to be fully realized within three to four years of the initial closing of the new transaction and derived primarily from procurement, cost savings and other operational matters.

The Skadden deal team includes: M&A partners Marie Gibson (Picture) and Paul Schnell and associates Mary Dear, Jack Rossman and Kathleen Negri; Corporate Finance partners Stacy Kanter and Michael Zeidel; Banking partner David Reamer; Intellectual Property and Technology partner Bruce Goldner and associate Pramode Chiruvolu (Palo Alto); Executive Compensation and Benefits partner Neil Leff and associate Page Griffin (Washington, D.C.); Labor and Employment Law partner David Schwartz; and Tax partner Chase Wink. All of the attorneys are based in New York unless otherwise noted.

 

Involved fees earner: Marie Gibson – Skadden Arps Slate Meager & Flom; Paul Schnell – Skadden Arps Slate Meager & Flom; Mary Dear – Skadden Arps Slate Meager & Flom; Jack Rossman – Skadden Arps Slate Meager & Flom; Kathleen Negri – Skadden Arps Slate Meager & Flom; Stacy Kanter – Skadden Arps Slate Meager & Flom; Michael Zeidel – Skadden Arps Slate Meager & Flom; David Reamer – Skadden Arps Slate Meager & Flom; Bruce Goldner – Skadden Arps Slate Meager & Flom; Pramode Chiruvolu – Skadden Arps Slate Meager & Flom; Neil Leff – Skadden Arps Slate Meager & Flom; Page Griffin – Skadden Arps Slate Meager & Flom; David Schwartz – Skadden Arps Slate Meager & Flom; Chase Wink – Skadden Arps Slate Meager & Flom;

Law Firms: Skadden Arps Slate Meager & Flom;

Clients: Rite Aid Corp.;

 

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Author: Ambrogio Visconti