Report: FTC to advise blocking Walgreens/Rite Aid deal

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The initial report, by Capital Forum, was cited by similar reports from other news outlets, including Reuters. 

Rite Aid’s corporate headquarters are located in East Pennsboro Township, Cumberland County.

A proposed $9-per-share acquisition of the pharmacy chain by Illinois-based rival Walgreens, first announced in fall 2015, remains incomplete due to lingering federal antitrust concerns.

Walgreens in early May looked to force the issue by declaring compliance with Federal Trade Commission requests for information. That move gave the commission 60 days to decide whether to approve the deal or file suit to oppose it.

Reuters on Friday reported that a source close to the deal confirmed that FTC staff “has asked companies and groups concerned about the deal for depositions and affidavits that could be used in a lawsuit aimed at stopping it.”

There was no official confirmation on Friday that the deal had been rejected. Reuters said officials with the FTC and both pharmacy chains declined comment, and no update about federal review could be found on the commission’s website.

But observers have long suggested that lengthy delays in obtaining FTC approval suggest federal regulators simply aren’t satisfied that the parties have done enough to ensure that the merged company would not squelch pharmacy industry competition.

Walgreens, the nation’s number one chain, and Rite Aid are formidable rivals and substantial retail players, both of which are counted among the Fortune 500 list of America’s top-earning corporations. 

Rite Aid, at no. 91, had revenues of $30.74 billion last year, up 15.9 percent over 2015. Walgreens, at no.17, had revenues of $117.3 billion.

The deadline — originally set to close in the second half of 2016 — was pushed back more than once and the price lowered as the FTC’s approval process kept the transaction in limbo.

The apparent hesitation came despite plans to sell 1,200 stores to Memphis-based chain Fred’s Inc. as an effort to make the deal work.

Rite Aid stock (NYSE: RAD) closed trading Friday at $3 per share, down from an opening price of $3.53. It dipped as low as $2.93 during the day.

The original deal, as noted, proposed that Walgreens would acquire Rite Aid for $9 per share. But the company’s stock lingered below $8 going into 2016.

By May of this year, as delays continued, Rite Aid corporate officials advised stockholders that they should expect $6.50 per share.

Rite Aid CEO John Standley reportedly sent employees a letter recently, acknowledging that there is no guarantee of approval, but a decision is expected soon.