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Walgreens Boots and Rite Aid to Vend 865 Stores to Fred's
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Walgreens Boots Alliance Inc. (WBA - Free Report) has moved forward with regards to the impending acquisition of Rite Aid Corporation (RAD). The company recently announced a $950 million agreement to sell 865 Rite Aid stores and certain assets related to the store operations to Fred’s, Inc.
The transaction is subject to Federal Trade Commission (FTC) approval while the pending acquisition of Rite Aid by Walgreens Boots Alliance is also contingent upon the store sale and other customary closing conditions.
In majority of the last six months, Walgreens Boots lagged the Zacks categorized Retail-Drug Stores Sub Industry. However, the trend improved once the company reported an earnings beat in the fourth quarter. Meanwhile, even though sales missed the mark, it grew 0.4% to $28.6 billion.
Additionally, the company has strong fundamentals with a 5-year CAGR of 13.1% in revenue and of 15.7% in earnings per share BNRI. Several recent strategic programs including skin product launches and vaccination programs are expected to boost growth for the company in the near future. Walgreens Boots currently has a strong cash position, which is evident from the recent increase in its cash flow reserve in the fourth quarter.
Meanwhile, the divestiture of Rite Aid stores is in response to concerns identified by the FTC in its review of the pending acquisition announced in Oct 2015. Walgreens Boots Alliance is actively engaged in discussions with the FTC regarding the transaction and is working toward closing the Rite Aid acquisition in early 2017.
Under the terms of the selling agreement, Fred’s Pharmacy will acquire 865 Rite Aid stores and employ the store employees upon completion of the deal. If the FTC requires divestiture of more than the 865 Rite Aid stores, the purchase agreement requires Fred’s to purchase the additional outlets.
Walgreens Boots claims it is leaving no stones unturned to obtain an approval for the Rite Aid buyout. Management continues to expect over $1 billion in synergies from the acquisition to be fully realized within three to four years of deal closure. These synergies are expected to be derived primarily from procurement, cost savings and other operational matters.
Management expects the buyout to accelerate Walgreens Boots’ strategy by providing a larger and more comprehensive portfolio and strong platform for the development of the company’s brand and overall business. The company has posted an improved quarterly performance on account of the strategic incorporation of Alliance Boots, leading to better segmental operations. Also, comparable pharmacy sales were up 0.6% at Boots UK. Earlier, Walgreens Boots witnessed considerable progress in sales of its No7 beauty brand, acquired through the Alliance Boots deal. Further, we believe the integration of Rite Aid will allow Walgreens Boots to bolster its business in the U.S. over the long haul.
Zacks Rank & Key Picks
Walgrens Boots Alliance carries a Zacks Rank #3 (Hold). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical gained 14.6% over the last one year compared to the S&P 500’s 11.4%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 17.2% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 111.3% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
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Walgreens Boots and Rite Aid to Vend 865 Stores to Fred's
Walgreens Boots Alliance Inc. (WBA - Free Report) has moved forward with regards to the impending acquisition of Rite Aid Corporation (RAD). The company recently announced a $950 million agreement to sell 865 Rite Aid stores and certain assets related to the store operations to Fred’s, Inc.
The transaction is subject to Federal Trade Commission (FTC) approval while the pending acquisition of Rite Aid by Walgreens Boots Alliance is also contingent upon the store sale and other customary closing conditions.
In majority of the last six months, Walgreens Boots lagged the Zacks categorized Retail-Drug Stores Sub Industry. However, the trend improved once the company reported an earnings beat in the fourth quarter. Meanwhile, even though sales missed the mark, it grew 0.4% to $28.6 billion.
Additionally, the company has strong fundamentals with a 5-year CAGR of 13.1% in revenue and of 15.7% in earnings per share BNRI. Several recent strategic programs including skin product launches and vaccination programs are expected to boost growth for the company in the near future. Walgreens Boots currently has a strong cash position, which is evident from the recent increase in its cash flow reserve in the fourth quarter.
Meanwhile, the divestiture of Rite Aid stores is in response to concerns identified by the FTC in its review of the pending acquisition announced in Oct 2015. Walgreens Boots Alliance is actively engaged in discussions with the FTC regarding the transaction and is working toward closing the Rite Aid acquisition in early 2017.
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Under the terms of the selling agreement, Fred’s Pharmacy will acquire 865 Rite Aid stores and employ the store employees upon completion of the deal. If the FTC requires divestiture of more than the 865 Rite Aid stores, the purchase agreement requires Fred’s to purchase the additional outlets.
Walgreens Boots claims it is leaving no stones unturned to obtain an approval for the Rite Aid buyout. Management continues to expect over $1 billion in synergies from the acquisition to be fully realized within three to four years of deal closure. These synergies are expected to be derived primarily from procurement, cost savings and other operational matters.
Management expects the buyout to accelerate Walgreens Boots’ strategy by providing a larger and more comprehensive portfolio and strong platform for the development of the company’s brand and overall business. The company has posted an improved quarterly performance on account of the strategic incorporation of Alliance Boots, leading to better segmental operations. Also, comparable pharmacy sales were up 0.6% at Boots UK. Earlier, Walgreens Boots witnessed considerable progress in sales of its No7 beauty brand, acquired through the Alliance Boots deal. Further, we believe the integration of Rite Aid will allow Walgreens Boots to bolster its business in the U.S. over the long haul.
Zacks Rank & Key Picks
Walgrens Boots Alliance carries a Zacks Rank #3 (Hold). Better-ranked medical stocks are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical gained 14.6% over the last one year compared to the S&P 500’s 11.4%. The company has a four-quarter average positive earnings surprise of 46.3%.
Baxter International rallied 17.2% over the last one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.
Bovie Medical recorded a 111.3% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>