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Is The Recent Rite Aid Deal A Merger-Arb Opportunity?

This articles discusses the potential merger-arbitrage opportunity in Rite Aid (NYSE:RAD).

On October 27, 2015, Walgreen's Boots Alliance (NASDAQ:WBA) and Rite Aid announced they entered into a definitive agreement for Walgreen's to acquire Rite Aid for $17.2 billion, or $9.00 per share in cash. Currently, Rite Aid runs about 4,600 stores in 31 states, while Walgreens has about 8,200 stores. The combination of these two companies would make it the biggest drugstore chain in the world with over 12,800 locations. CVS would be the second largest chain by store count with 8.000 locations.

The two companies believe the deal will create an advanced opportunity for the new company to deliver high-quality retail pharmacy choice to U.S. consumers.

Stefano Pessina, CEO of Walgreens, has this to say about the merger, "Today's announcement is another step in Walgreens Boots Alliance's global development and continues our profitable growth strategy. In both mature and newer markets across the world, our approach is to advance and broaden the delivery of retail health, wellbeing and beauty products and services."

He goes on to say, "This combination will further strengthen our commitment to making quality healthcare accessible to more customers and patients. Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online. Walgreens Boots Alliance will provide to Rite Aid its global expertise and resources to accelerate the delivery of integrated frontline care, and to offer innovative solutions for providers, payers and other entities in the U.S. healthcare system. Finally, this combination will generate a stronger base for sustainable growth and investment into Rite Aid stores, while realizing synergies over time."

The potential for anti-trust issues is a concern in this deal. Recently, Walgreens mentioned in regulatory filings that they would probably divest or close up to 1,000 stores, although the company only expected...