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Rite Aid-Walgreen deal fate worries investors

March 8, 2017

Rite Aid (RAD) stock kept plunging Wednesday as investors worry that the Walgreens Boots Alliance (WBA) takeover won’t ever close.

Shares of Rite Aid sank 7.2% to 4.65 on the stock market today, falling to their worst levels since October 2014. That follows a 4.2% slide on Wednesday. Rite Aid is down 22.5% so far this month.

Walgreens Boots Alliance is mulling a move to force the Federal Trade Commission to finally rule on its proposed Rite Aid takeover, the New York Post reported Tuesday.

Walgreens could declare that it has “certified compliance” with its application, meaning that it has given all the key information needed for regulators to make a decision.

That would force the FTC to rule within 30 days on the merger, first announced in late 2015. There are just two commissioners currently on the five-person FTC: Maureen Ohlhausen, a Republican, and Terrell McSweeny, a Democrat. Walgreens may believe that it’s unlikely for the duo to jointly oppose the merger.

Walgreens shares fell 1% to 85.16 on Wednesday. Walgreens is in a cup-with-handle base with a potential 88.10 buy point.

But Rite Aid stock slid 4.2% to 5.01, the lowest since October 2014 and extending a sharp recent sell-off.

Meanwhile smaller rival Fred’s (FRED), which has agreed to buy 865 Rite Aid stores for some $950 million to try to ease antitrust concerns, lost 2.5% on Wednesday after skidding 3.6% on Tuesday. The Rite Aid deal is contingent on the Walgreens takeover getting the go-ahead. Also, regulators reportedly have concerns over whether Fred’s can successfully absorb that many locations.

Walgreens agreed to buy Rite Aid for $9 a share in October 2015. In January, after the merger deal expired, Walgreens cut the price to $6.50-$7 a share depending on how many Rite Aid stores must be sold.


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