(Bloomberg) -- Walgreens Boots Alliance Inc. clinched regulatory approval for a deal to buy Rite Aid Corp. stores after a last-minute reduction of the number of stores and price, a hard-fought victory following two years of failed attempts.
The drugstore chain gained clearance from the U.S. Federal Trade Commission on its fourth try, but still drew criticism from one of the two commissioners currently on the short-staffed agency, who raised concerns that the deal will reduce competition and lead to rising prices for generic drugs.
Under the new agreement, announced Tuesday, Walgreens will buy 1,932 Rite Aid stores for $4.38 billion, becoming a bigger competitor to CVS Health Corp. That’s about 250 fewer stores than under a previous proposal, which totaled $5.18 billion.
Walgreens Chief Executive Officer Stefano Pessina has pushed for a transaction since the fall of 2015. The modified agreement, while reduced, will still enable Walgreens to dramatically expand its footprint and edge past CVS to become the largest U.S. pharmacy chain by number of stores.
Walgreens dropped 2 percent to $80.96 at 10:23 a.m. in New York, while Rite Aid shares declined 9.3 percent to $2.48.
Federal Trade Commissioner Terrell McSweeny, in a statement, said the acquisition shouldn’t have been approved by the agency so soon without an in-depth investigation into the effect on competition.
“I am concerned that the transaction will leave some communities with fewer pharmacy options and could lead to higher drug prices,” said McSweeny, a Democrat.
The commission’s acting chairman, Maureen Ohlhausen, said in a separate statement the agency over the past 22 months had thoroughly reviewed the competitive issues associated with Walgreen’s acquisition of Rite Aid stores.
“Rite Aid will remain a robust competitor in the areas where its presence matters,” Ohlhausen said. “Rite Aid is likely to achieve comparable or even lower costs for generic drugs for the foreseeable future.”
Roadblocks
The store purchases are expected to begin in October and be completed in the spring of 2018, Walgreens said. Most of them are in the northeast and southern U.S., the company said.
With the addition of the Rite Aid stores, Walgreens will have about 10,000 locations in the U.S., compared with 9,700 for CVS. Rite Aid said it will retain about 2,600 stores when the deal is complete.
Walgreens initially proposed a takeover of Rite Aid in October 2015 for $9 a share, or $9.4 billion. That deal ran into roadblocks at the FTC, and in January Walgreens and Rite Aid recut the deal in an attempt to resolve the agency’s concerns that the combination would hurt competition.
A revamped merger plan called for selling up to 1,200 Rite Aid locations to another buyer to satisfy the FTC and was worth at least $2 billion less to Rite Aid shareholders. That approach, which could have cost Walgreens as much as $7.37 billion, again failed to win over the regulator, and Walgreens terminated the plan in June.
The company said it instead would pay $5.18 billion to acquire 2,186 stores, leaving a slimmed-down Rite Aid as a stand-alone company. But that still wasn’t enough to satisfy the FTC. The final version of the deal that was announced Tuesday has about 12 percent fewer stores -- and a lower price.
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