Walgreens Close To Buying Rite Aid

klkla
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Re: Walgreens Close To Buying Rite Aid

Post by klkla »

storewanderer wrote:Great news. I hope this deal falls through. ... Politics aside I think they were clearly trying to ram something through during the end of the Obama administration and before Trump administration people get settled in. It didn't work, and I am glad for that ... If we are trying to preserve jobs then this merger definitely needs to be blocked.
I agree with you that it's good that it looks like this deal may fall apart but it's the Obama FTC that is blocking it at this point FWIW.
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Re: Walgreens Close To Buying Rite Aid

Post by pseudo3d »

jamcool wrote:If the merger doesn't go through what happens to Rite Aid?
It gets a hefty termination fee, that's for sure. However, I don't think that they'll let go quite that easily, I'm thinking that Walgreens will still try to trade markets with Rite Aid.
klkla wrote:
storewanderer wrote:Great news. I hope this deal falls through. ... Politics aside I think they were clearly trying to ram something through during the end of the Obama administration and before Trump administration people get settled in. It didn't work, and I am glad for that ... If we are trying to preserve jobs then this merger definitely needs to be blocked.
I agree with you that it's good that it looks like this deal may fall apart but it's the Obama FTC that is blocking it at this point FWIW.
Yeah, but they were trying to get through the Obama FTC (which still is blocking it) because apparently they have even less faith that the Trump FTC will greenlight it. Too many factors to know what's going on...maybe some unions pushed really hard against the merger, knowing how Haggen killed the union jobs (that's why they went to bat for Albertsons to buy them all back, because they would preserve them)...maybe cooler heads at Fred's prevailed and they realized just what they were getting into...and maybe everything else is okay and the Trump FTC actually will okay it. No one knows (at least us). Until Walgreens officially gives up the plan as-is, then I don't know what to think.
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Re: Walgreens Close To Buying Rite Aid

Post by wnetmacman »

It's starting to look like this won't happen. Today, Rite Aid promoted someone to run HR. You wouldn't do that for a company that is soon to be sold.

Rite Aid Names HR Chief
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Re: Walgreens Close To Buying Rite Aid

Post by storewanderer »

I hope Rite Aid can get out of this agreement if it isn't approved by the 27th. They can use the termination fee to pay down debt or something...

Rite Aid's inventory levels got pretty low around Halloween/Christmas but more recently the stores seem stocked a little better again. I noticed specifically seasonal and private label items were in very short supply. I think they had forecasted they would be "out of business" by that time and on the Walgreens merchandise mix so they did not buy enough product. I suspect this will impact their sales over the holidays, but so what.

I still think it is possible they may surprise us and some "other" bidders may be exposed who would be more acceptable to the FTC than Freds (like Albertsons). Or perhaps, Freds takes some of the stores, and other operators take stores elsewhere. This would make more sense. Freds taking all of the stores makes NO sense other than to people who care about nothing more than receiving their $9/share.

Luckily, Rite Aid has been continuing operations fairly consistently other than that. They have still been remodeling stores, they have still been building a new stores (and scouting a few new store sites), etc., throughout all of this.

Unlike Office Depot who "rolled over and played dead" as the Staples merger was being fought with the FTC and was ultimately left in a really bad spot because they had been sitting in a holding pattern too long.
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Re: Walgreens Close To Buying Rite Aid

Post by pseudo3d »

storewanderer wrote:I hope Rite Aid can get out of this agreement if it isn't approved by the 27th. They can use the termination fee to pay down debt or something...

Rite Aid's inventory levels got pretty low around Halloween/Christmas but more recently the stores seem stocked a little better again. I noticed specifically seasonal and private label items were in very short supply. I think they had forecasted they would be "out of business" by that time and on the Walgreens merchandise mix so they did not buy enough product. I suspect this will impact their sales over the holidays, but so what.

I still think it is possible they may surprise us and some "other" bidders may be exposed who would be more acceptable to the FTC than Freds (like Albertsons). Or perhaps, Freds takes some of the stores, and other operators take stores elsewhere. This would make more sense. Freds taking all of the stores makes NO sense other than to people who care about nothing more than receiving their $9/share.
Unless it was Fred's who got their head screwed on straight and either pulled out entirely or didn't want to buy as many stores as Walgreens wanted (or some variation--like they wanted to talk down the price), I doubt that any other bidders would come forward in the deal's current state. I think the "next step" is Walgreens trading/buying stores with Rite Aid.
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Re: Walgreens Close To Buying Rite Aid

Post by BillyGr »

pseudo3d wrote:Unless it was Fred's who got their head screwed on straight and either pulled out entirely or didn't want to buy as many stores as Walgreens wanted (or some variation--like they wanted to talk down the price), I doubt that any other bidders would come forward in the deal's current state. I think the "next step" is Walgreens trading/buying stores with Rite Aid.
Seems like that could happen, and perhaps be a benefit to everyone. For instance, in this area Walgreens is relatively new, and they have built a number of stores but in sort of "localized" areas. Meanwhile, there are at least a few areas in between these where there are 2 or even 3 Rite Aid locations in fairly close proximity (some due to the acquisitions from Eckerd). So it could make sense for either Walgreens to outright buy some of the Rite Aid stores to "fill in" their footprints, or trade those Rite Aid stores here for some Walgreens in another area where the situation is reversed.

Another thought - since there seemed to be some issue with areas where Walgreens and Rite Aid were the only two chains (aka no or little CVS presence), might Walgreens try working with CVS to somehow "split" Rite Aid locations so that you'd wind up with 2 bigger chains, both existing in most areas?
Seems that might be more acceptable to regulators, as they would know CVS would be more likely to do well with the extra stores (unlike the Fred's option), while still allowing Walgreens to gain in areas where Rite Aid exists that they currently don't (or do only in limited spots, like noted above)?
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Re: Walgreens Close To Buying Rite Aid

Post by pseudo3d »

BillyGr wrote:
pseudo3d wrote:Unless it was Fred's who got their head screwed on straight and either pulled out entirely or didn't want to buy as many stores as Walgreens wanted (or some variation--like they wanted to talk down the price), I doubt that any other bidders would come forward in the deal's current state. I think the "next step" is Walgreens trading/buying stores with Rite Aid.
Seems like that could happen, and perhaps be a benefit to everyone. For instance, in this area Walgreens is relatively new, and they have built a number of stores but in sort of "localized" areas. Meanwhile, there are at least a few areas in between these where there are 2 or even 3 Rite Aid locations in fairly close proximity (some due to the acquisitions from Eckerd). So it could make sense for either Walgreens to outright buy some of the Rite Aid stores to "fill in" their footprints, or trade those Rite Aid stores here for some Walgreens in another area where the situation is reversed.

Another thought - since there seemed to be some issue with areas where Walgreens and Rite Aid were the only two chains (aka no or little CVS presence), might Walgreens try working with CVS to somehow "split" Rite Aid locations so that you'd wind up with 2 bigger chains, both existing in most areas?
Seems that might be more acceptable to regulators, as they would know CVS would be more likely to do well with the extra stores (unlike the Fred's option), while still allowing Walgreens to gain in areas where Rite Aid exists that they currently don't (or do only in limited spots, like noted above)?
Considering that Walgreens had wanted to pawn off an unrealistic number of their stores to a relatively obscure East Coast variety store, I'm pretty sure selling stores to CVS is off the table at this point.
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Re: Walgreens Close To Buying Rite Aid

Post by storewanderer »

Logically, CVS could use a good number of stores being divested. It would strengthen their position in the east like NYC, Pacific Northwest, and Utah/Colorado/Idaho where they are trying to expand organically.

I suspect CVS does not want to help Walgreens get bigger than they are, so they do not want to help with this by buying divested stores. Given that CVS went and spoke against this to the FTC, it seems to me they would not assist by taking divested stores. Even if taking divested stores would help them... (or maybe they would rather just build their little stores organically in those new markets and not bother buying 30+ year old large format strip mall drugstores).
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Re: Walgreens Close To Buying Rite Aid

Post by babs »

storewanderer wrote:Logically, CVS could use a good number of stores being divested. It would strengthen their position in the east like NYC, Pacific Northwest, and Utah/Colorado/Idaho where they are trying to expand organically.

I suspect CVS does not want to help Walgreens get bigger than they are, so they do not want to help with this by buying divested stores. Given that CVS went and spoke against this to the FTC, it seems to me they would not assist by taking divested stores. Even if taking divested stores would help them... (or maybe they would rather just build their little stores organically in those new markets and not bother buying 30+ year old large format strip mall drugstores).
I read about this a few months ago. The real story is that Walgreens was only willing to sell the lesser of the two stores where there is an overlap between Walgreens and Rite Aid. CVS told them they weren't interested in buying the garbage stores and if Walgreens was interested in a deal they should come back and offer up some of their better performing stores. CVS didn't want to get stuck with a bunch of dog stores. No sense in buying stores that either are in poor locations that need to be relocated or need a ton of investment to turn them around. CVS might as well save their money and grow organically. If Walgreens had offered up some better stores to CVS then this merger would be a done deal by now.
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Re: Walgreens Close To Buying Rite Aid

Post by storewanderer »

I also suspect the move to push out a ton of dog stores is why Albertsons did not bite on this. Bob Miller ran Rite Aid for enough years to know very well the internals of that company and the performance of a lot of the dog stores. Useless stores, essentially, especially down in the South where Rite Aid's old strip mall stores and the former Eckerds do literally no business (not sure why they are even open). But I am confident on the west coast some good stores were offered as Rite Aid has a lot of good performers on the west coast and there is overlap.

Fred's, a money losing company operating primarily in the rural south. Buying 865 Rite Aid stores, some unionized, in very distant markets; urban markets; and even stating right in their release about the bid that the stores they are bidding on profitability and performance come in as similar to Rite Aid Corporation's overall performance (as in, barely breaking even)...

Yes, no wonder the FTC appears to be questioning this. No wonder CVS did not buy. No wonder Kroger only wanted to buy pharmacy records and move them to nearby supermarkets (I'm sure many other parties would like to do that too).

Well, I suppose not offering up 100-200 non-strategic Walgreens locations to a bidder as part of the divest package is worth the $325 million that will need to be paid for termination, right?

They could have even left an entire region or something just to make the bidding package more attractive and "do a little more" for regulators. Sort of like when Sobeys bought Canada Safeway and divested off a dozen or so stores that were not required to be divested; they did it just to make the package more attractive to the buyers of the divested stores.
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