Is the Walgreens/Rite Aid Merger in Jeopardy?

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Is the Walgreens/Rite Aid Merger in Jeopardy?

By Tim Denman - 10/24/2016
When Walgreen and Rite Aid announced last fall that they would be merging it sent ripples through the retail industry — it would create the world's largest drug retailer. Unfortunately, it also sent ripples through the FTC who informed the Walgreens Boot Alliance that it would need to divest up to 1,000 locations to comply with U.S. anti-trust regulations — a feat that has proven much harder than expected.
 
The latest setback came when Kroger reportedly backed out of its plan to purchase 650 locations when it was informed by the FTC that it would not be able to simply close the locations that competed in their markets.
 
The Walgreens/Rite Aid merger was supposed to be finalized on October 27, but has been now pushed back to January 27, 2017, as Walgreens attempts to find another suitor for its locations. Although from the outside looking in the merger appears to be in trouble, Walgreen is still steadfast in its belief that the deal will eventually be finalized.
 
"We remain actively engaged with the FTC on its review," said George Fairweather, EVP and global CFO Walgreens Boots Alliance on a recent earnings call with analysts. "We still expect that the most likely outcome will be that the parties will be [required] to divest between 500 and a 1,000 stores. We believe that we’ll be able to execute agreements to divest these stores to potential buyers, pending FTC approval, by the end of calendar year 2016, and now expect to close the acquisition in early calendar 2017."
 
While Walgreens continues to toil to get its blockbuster acquisition approved it is also working diligently to improve its profitability and the shopping experience it provides. The retailer continues to be a leader in building shopper devotion through its loyalty program and the brand's mobile app which bridges the gap between the digital and physical Walgreens experience. To further enhance its omnichannel offering the drug store chain announced that it will be launching ship to store at 7,600 stores including Duane Reade.