Walgreens ditches Rite Aid acquisition

The new deal replaces the merger agreement with Rite Aid announced in October 2015 and amended in January of this year, and the agreement to divest certain Rite Aid stores to Fred's Inc announced in December 2016. Both of these agreements have been terminated and Walgreens will pay Rite Aid the $325m termination fee with respect to their merger agreement.

Walgreens said the new transaction should be modestly accretive to its adjusted diluted net earnings per share in the first full year after the initial closing and it expects to realise synergies in excess of $400m. These should be fully realised within three to four years of the initial closing of the new transaction and derived primarily from procurement, cost savings and other operational matters.

Executive vice chairman and chief executive officer Stefano Pessina said: "This new transaction extends our growth strategy and offers additional operational and financial benefits.

"It will allow us to expand and optimise our retail pharmacy network in key markets in the US, including the Northeast, and provide customers and patients with greater access to convenient, affordable care. We believe this new transaction addresses competitive concerns previously raised with respect to the prior transaction and will streamline and simplify the transition for customers, team members and other stakeholders."

At 1413 BST, Walgreens share were up 6% in pre-market trade while Rite Aid was off a whopping 18%.