Rite Aid Stock Tanks as Walgreens Drops Merger Price



The amended WBA-RAD merger agreement

Walgreens Boots Alliance (WBA) and Rite Aid (RAD) announced on January 30, 2017, that they’ve amended their merger agreement in which Walgreens will acquire all outstanding shares of Rite Aid.

According to the amendment, Walgreens will now pay $6.50–$7 per share to Rite Aid shareholders, depending on the number of stores it must divest. That compares to $9 per share that Walgreens agreed to pay when it first made the deal in October 2015.

The two companies also extended the closing date of the merger from January 27, 2017, to July 31, 2017. It’s the second time the deadline has been postponed.

We’ll cover the amended agreement in more detail in Part 3 of this series. In the next part, we’ll show you what’s been happening with the deal over the last year.

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Rite Aid stock tanked on the news

The revised agreement wasn’t good news for Rite Aid shareholders. RAD stock fell sharply by 17.5% on January 30, 2017, and another 1.7% the next day. The company is trading at its 52-week low of $5.62 per share.

Walgreens Boots Alliance stock was almost unaffected, rising ~0.50% over the last two days.

The three biggest drug store chains in the United States

Walgreens Boots Alliance is the second largest pharmacy retail chain in the United States in terms of market cap and sales. It has trailing 12-month (or TTM) sales of $117.3 billion. CVS Health (CVS) is the largest pharmacy chain and has TTM sales of $166.7 billion. Rite Aid is the third largest and has TTM sales of $32.6 billion.

If you’re looking for exposure to Walgreens, CVS, or Rite Aid, you can invest in the SPDR S&P Retail ETF (XRT). XRT invests 3.2% of its portfolio in the three drug store chains.


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