Sept. 11, 2018
Dive
Brief:
- Walgreens
is acquiring pharmacy patient prescription files and pharmacy inventory of
185 Fred's stores located across 10 Southeastern states for $165
million, according to a press release from
the companies.
- Fred's
retail operations will remain at most of those locations and the company
will continue to operate 162 pharmacies across nearly 600 stores. Pharmacy
staff at the closing locations can apply for available positions at
Walgreens, the company said.
- The transaction is part of
Fred's previously announced effort "to
unlock shareholder value by monetizing non-core assets through strategic
transactions," according to the release. The file transfers
are expected to begin in the fourth quarter this year and be completed in
the first quarter of next year, the companies said.
Dive
Insight:
The
ongoing dissolution of much of Fred's pharmacy operations is a stark departure
from the retailer's ambitions when a merger of Walgreens and Rite Aid still
seemed possible.
A
little over a year ago, Fred's was looking at a major expansion because it had
agreed to take on 865 Rite Aid stores across
the eastern and western U.S. for $950 million in cash. The deal would have
positioned Fred's as the third-largest drugstore chain in the U.S., after
Walgreens and CVS. Taking on those Rite Aid stores (an unsuccessful move
designed to assuage antitrust regulators to smooth approval of the merger)
would have been a stretch for Fred's, and some analysts were skeptical from the get-go.
But
it's all moot now, and Fred's is adjusting its ambitions in the aftermath of
that failed merger.
"With this agreement, we have taken a major step towards achieving one of
our main goals of eliminating our debt balance," Fred's Interim
CEO and CFO Joe Anto said in a statement Monday.
The
deal furthers Walgreens' scaled-back ambitions in light of the failed
merger attempt. Despite it, Walgreens has acquired 1,932 Rite Aid stores
and three Rite Aid distribution centers and related inventory. The drugstore
retailer is also in the midst of shuttering 600 U.S. stores and
related assets.
The
move to have Walgreens pharmacies within Fred's stores has a precedent. Target
in 2016 sold off its pharmacy operations to
CVS Health, which now runs those operations within Target stores.
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