$17.2 Billion Buy: Walgreens in Deal to Acquire Rite Aid

$17.2 Billion Buy: Walgreens in Deal to Acquire Rite Aid

Walgreens said Tuesday that it will buy rival Rite Aid in a $17.2 billion deal, according to reports.

If the deal gets regulatory approval, it would combine the second and third largest drugstore operators and intensify competition between Walgreens and CVS Health.

CVS has a 58% market share in the pharmacy and drug store industry, while Walgreens controls 31%, and Rite Aid has 10%, as reported by USA Today. The industry has $263 billion in annual revenue.

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Rite Aid operates 4,600 stores in 31 states and the District of Columbia, and is the largest drugstore chain on the East Coast. It’s also the third-largest drugstore in the United States, employing roughly 89,000 associates. Combining the two could mean a mega-entity with more than 12,000 stores in operation.

As pharmacies compete with mail-order prescription discounters, online stores, wholesale retailers like Costco, and health clinics, this deal would give the drugstore companies more leverage to negotiate with drug makers.

Reports also indicate that Rite Aid would keep its brand name. The company plans to save more than $1 billion in “synergies,” which could come in the form of combined purchasing power and cost cuts.

Experts say customers may not see a huge financial impact on their wallets if the acquisition is approved, but there are expected to be store closures or brand name changes and fewer brand choices. Consumers may also see more clinics in Rite Aid stores and more preventative health products, such as vitamins and supplements, as the sector continues to shift beyond providing prescriptions. Many drugstores have revamped their offerings to appeal to customers who want a one-stop-shopping experience.

The two companies expect the deal to close in the second half of 2016.