Rite Aid-Walgreen Merger Still Likely To Go Through; New Price Estimate Reflects Risks, New Terms

by Trefis Team
Rite Aid
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Rite Aid Corporation (NYSE:RAD) has had a tumultuous year, with the company missing consensus revenue estimates in each of  the last three quarters and still awaiting regulatory approval for its proposed acquisition by Walgreens Boots Alliance. The earlier deadline for the approval was January 27, but both companies recently agreed to extend the merger deadline to July 31. Further, they modified the terms of the merger, which has significantly impacted Rite Aid’s stock price in recent weeks. Rite Aid’s stock hit a 52-week low following this development and is currently trading around $5, compared to a high of $8.70 in January.

Per the revised terms, Walgreens will pay $6.50 to $7 per share, compared to the $9 it proposed earlier. The final price that Walgreens will pay will depend on the number of stores that it plans to divest. Under the new proposal, Walgreens will divest between 1,000 and 1,200 stores, as the earlier plan of divesting 865 stores and certain assets for $950 million attracted regulatory scrutiny.

In light of these recent developments, we are revising our price estimate for Rite Aid to around $6, based on the new terms as well as the risk of the merger not going through (though we still expect it to ultimately receive approval).

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