its a important news. With walbaum closing down in most of the places, Riteaid will be owned by walgreens as well which means lesser competition all over. @Southie or any other financial guru to do the analysis of this merger?
October 27, 2015, 5:38 PM
Walgreens buying Rite Aid for $9.4 billion in cash
Last Updated Oct 27, 2015 5:47 PM EDT
Walgreens, the biggest U.S. drugstore chain, on Tuesday confirmed it would buy Rite Aid (RAD) for $9.41 billion in cash.
The Wall Street Journal first reported news of the deal.
Walgreens says it will pay $9 per share for Camp Hill, Pennsylvania-based Rite Aid Corp. That’s a premium of roughly 48 percent to the closing price of Rite Aid.
The deal is worth $17.2 billion when debt is included, the companies said.
Walgreens Boots Alliance Inc. (WBA), based in Deerfield, Illinois, is the largest U.S. drugstore chain, based on store counts. Rite Aid is the third largest. The deal expected to close in the second half of next year.
That tie-up would make one of the world’s largest pharmaceutical buyers even bigger at a time when other key health care players like insurers and drugmakers also are expanding through multi-billion dollar deals.
The Deerfield, Illinois, company is less than a year removed from closing its acquisition of European health and beauty retailer Alliance Boots, which runs the biggest drugstore chain in the United Kingdom. That combination created Walgreens Boots Alliance Inc., which runs more than 13,200 stores and 350 distribution centers in 11 countries.
Not sure if the consumers will be affected. For a while now the retail chains like Kroger, WalMart, Sams club etc have been taking a chunk of their pharmacy business. If RiteAid is out, one of those will take it place and there will still be competition. Eventually walgreens and cvs could end up with cosmetics as their main business.
Not sure if the consumers will be affected. For a while now the retail chains like Kroger, WalMart, Sams club etc have been taking a chunk of their pharmacy business. If RiteAid is out, one of those will take it place and there will still be competition. Eventually walgreens and cvs could end up with cosmetics as their main business.
More mergers is less competition which in-turn means more monopoly. So it does have a impact on consumers I believe. Its just we arent sure how long will it take to feel it.
How about reading post 6 and this article more carefully. Post 6 ties the balance sheet woes with the lowly FCF as a percentage of net debt. While the article does not have any mention of FCF.
You should know better. Just analyzing one of the financial statement - balance sheet in the articles case - onky gives part of the story.
More mergers is less competition which in-turn means more monopoly. So it does have a impact on consumers I believe. Its just we arent sure how long will it take to feel it.
Not always true. For eg. Ma Bell was broken up because of monopoly concerns, but after deregulation in late 90s, there were so many players that it merged back into AT&T. Nobody can really say that telecom industry today is monopolistic or that consumers are worse off now. Something similar will happen with pharmacy.
With players like Kroger, Walmart, Sams club, albertsons etc., with their infrastructure and buying power, will transform the pharmacy industry. They may already be doing it. Many grocery store based pharmacies sell common antibiotics, blood pressure and cholesterol medicines for $0.00 or some nominal amount < $5.00. Walgreens or cvs can only compete with them if they either expand their business to their turf ( grocery ) or merge and leverage the synergies with other pharmacies. Regardless, I don't think it will be bad for the consumer.
I recall reading at present Walmart fills 2nd or 3rd most number of prescriptions. There is plenty of competition as stated above.
If I were a Walgreens shareholder I would question the premium paid and the huge debt being acquired. If I we a rite Aid shareholder I just sell now and take the profit and walk away gratefully.
1- walgreens negotiating power increases and they get better rates from all suppliers- which they may pass to the consumer in which case consumer wins
2- less competition in some markets may prompt them to have higher prices than they would otherwise.
both are possible, although for competition we have to expand the definition to walmart, samsclub, costco and mail order pharmacies etc as well.
