Business & Tech

Walgreens calls off deal to buy Rite Aid

Instead of merging with Rite Aid, Walgreens will buy 2,186 of its stores.
Elise Amendola/Associated Press/File 2016
Instead of merging with Rite Aid, Walgreens will buy 2,186 of its stores.

NEW YORK — Walgreens Boots Alliance and Rite Aid said Thursday that they had called off their long-planned merger, after antitrust authorities indicated they were not likely to approve the combination of two of the nation’s biggest drugstore chains.

Instead, Rite Aid will sell 2,186 stores, out of its 4,600 total, and three distribution centers to Walgreens for $5.18 billion, ending nearly two years of negotiations between the two chains.

Regulators have become increasingly concerned in recent years about mergers creating dominant players in some sectors and have derailed several health care deals.

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In January, a federal judge blocked a $37 billion merger between the health insurance giants Aetna and Humana after the US Justice Department said that it should not go forward on antitrust grounds.

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Less than a month later, another federal judge said that a $48 billion merger between two other big health insurers, Anthem and Cigna, should not go forward.

In April 2016, the drug maker Pfizer abandoned its $152 billion merger with Allergan after the Obama administration introduced new tax rules intended to limit the ability of companies to shed US corporate citizenship to cut tax bills.

Outside the health care world, oil field services companies Halliburton and Baker Hughes abandoned a $35 billion merger in May 2016 after the Justice Department moved to block the deal. In October, General Electric agreed to combine its oil and gas division with Baker Hughes instead.

The new agreement between the drugstore chains will annul not only the planned sale of Rite Aid to Walgreens but also the sale of some Rite Aid stores to Fred’s Inc., a related transaction that was aimed at helping the two companies win antitrust approval.

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“We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members, and other stakeholders,” said Walgreens’ chief executive, Stefano Pessina.

The companies agreed to merge in October 2015, and analysts expected the deal to meet resistance. It would have created a group with more outlets than CVS Health, the biggest drugstore chain by market capitalization at the time. Before Thursday’s deal, Walgreens had 8,175 stores.

In January this year, Walgreens and Rite Aid said they would cut the price of the proposed sale.

With the merger called off, Rite Aid will receive a $325 million termination fee relating to the old merger agreement. Rite Aid said the sale of its stores was expected to close within six months.