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Rite Aid (RAD) Completes Agreed Store Transfers to Walgreens

Rite Aid CorporationRAD successfully completed the transfer of all stores and related assets to Walgreens Boots Alliance Inc. WBA under its amended and restated asset purchase agreement. As of Mar 27, 2018, it transferred all 1,932 stores and related assets to Walgreens for net cash proceeds of $4.157 billion.

With the cash proceeds, management has been lowering debt, thus, solidifying its liquidity position. Per the agreement, Walgreens decided to buy 1,932 Rite Aid stores, three distribution centers and related inventory in an all-cash deal of $4.4 billion. While the transfer of stores and related assets is complete, the company plans to transfer the three distribution centers and related inventory, starting Sep 1, 2018.

The company stated that majority of the closing conditions for the deal have been met and only a few conditions applicable to the distribution centers need to be satisfied.

Additionally, Rite Aid revealed that it has ended the tax benefits preservation plan, which was announced on Jan 3, 2018. This plan helped the company to save nearly $2.2 billion of its operating losses. The plan was initially set to expire on Jan 3, 2019.

The completion of the transfer of stores to Walgreens significantly boosted Rite Aid's stock price, which rallied 12.8% on Mar 28. However, this Zacks Rank #3 (Hold) stock declined 15.3% in the last three months, wider than the industry 's fall of 10.7%.

Following the transfer of stores to Walgreens, Rite Aid, with more than 2,500 stores, is set to carry out the previously agreed proposal to merge with the country's largest grocer, Albertsons Companies. Per the deal, Rite Aid shareholders have the choice to opt for Albertsons' shares and cash or only the company's shares.

For every 10 Rite Aid shares, shareholders can get one Albertsons share and $1.83 in cash or 1.079 Albertsons shares. This will leave Rite Aid shareholders with about 28-29.6% stake in the combined company, subject to the outcome of the cash elections. Meanwhile, Albertsons' shareholders will own nearly 70.4-72% stake in the combined company.

The combined company is expected to generate annual revenues of about $83 billion. Further, the new entity anticipates delivering annual run-rate cost savings of $375 million in the next three years. Of these, the companies expect to realize nearly 60% of the cost synergies in the first two years after closing the transaction. Additionally, the companies anticipate identifying about $3.6 billion of potential revenue opportunities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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