With One Week Left, Walgreens-Rite Aid Merger May Be In Trouble

Image courtesy of Nicholas Eckhart

The proposed merger of mega-drugstore chains Walgreens and Rite Aid seems like a good idea to the companies, but the Federal Trade Commission remains skeptical. With a week left before the purchase agreement expires, the companies need the antitrust watchdog to sign off, and it looks like they may not get it.

“People familiar with the matter” have told Bloomberg that the Commission’s lawyers aren’t satisfied with the companies’ plan, which would have the larger chain (Walgreens) sell 865 stores to a regional rival, Fred’s Inc., does not have the approval of FTC officials.

The goal of selling off stores is to preserve competition. Walgreens has 8,177 stores, and Rite Aid has 4,600. The FTC sources told Bloomberg that selling just over 10% of Walgreens stores simply isn’t enough to meet their approval, since it doesn’t do much to preserve competition in the drugstore and prescription drug industry.

The merger would bring the #2 and #3 drugstore chains together, overtaking CVS as the top brand. However, the merger would remove a national competitor, and close stores in areas that have both a Walgreens and a Rite Aid.

Bloomberg’s source does not know whether the FTC has a recommendation to counter the plan it is rejecting: it could propose selling more stores to Fred’s or to a different rival, for example. As new officials

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