Walgreens Boots Alliance has agreed to acquire Rite Aid for more than $9.4 billion in cash, uniting two of the country’s biggest drugstore chains.
Under terms of the deal announced Tuesday, Rite Aid shareholders will receive $9 a share, a premium of 48 percent from its closing stock price Monday.
Including the assumption of net debt, the deal gives Rite Aid a total enterprise value of $17.2 billion.
“Today’s announcement is another step in Walgreens Boots Alliance’s global development and continues our profitable growth strategy” Stefano Pessina, CEO of Walgreens, said in a statement Tuesday.
A combination of Walgreens and Rite Aid creates a new pharmacy giant with heightened influence with drugmakers, pharmacy benefit managers and others in the health care industry.
Sweeping changes to health care under the federal Affordable Care Act and the rise in insured Americans has increased prescription demand, helping to increase the total revenue of the nation’s retail, mail and specialty pharmacies by 7 percent last year, compared with 2013. At the same time, companies have also been pressured to keep costs down.
A deal comes after several waves of consolidation that have reshaped the pharmacy industry. Since 2010, Walgreens has acquired Duane Reade, USA Drugs and Kerr Drug, helping it grow to more than 8,200 stores and revenue of $76 billion last year.
Last year, Walgreens struck a complicated deal to buy Alliance Boots, a British pharmacy chain, to gain a foothold in Europe.
Buying Rite Aid gives it an additional 4,600 stores in 31 states, adding to its roughly 8,200 locations across the country, Puerto Rico and the Virgin Islands.
The biggest drugstore chain, CVS Health, has also grown, acquiring Long’s Drug, Medicine Chest and Navarro Discount Pharmacy, and now runs more than 7,800 stores.
With years of steep losses, Rite Aid, which itself acquired the Brooks and Eckerd pharmacy chains in 2007, has fallen to a distant third.
“The pharmacy consolidation endgame has begun,” said Adam J. Fein, president of Pembroke Consulting, a Philadelphia-based firm that specializes in the pharmaceutical industry. “Rite Aid was one of the last remaining pharmacy assets available for purchase,” he said.
“Even with its debt, Rite Aid could have survived into the future. But this combination will give the new business a lot more scale,” he said.
“The combined entity will have a lot more power against pharmacy benefit managers and other payers. They will be able to negotiate higher reimbursements for prescriptions.”
Shares of Rite Aid rose by $2.59, or 42.6 percent, Tuesday to close at $8.67.