Walgreens scraps Rite Aid merger

Drugstore chain Walgreens Boots Alliance Inc. scrapped its deal to buy Rite Aid Corp. after failing to win antitrust approval. But said it instead would buy nearly half of the smaller rival's U.S. stores for $5.18 billion.

The new deal makes it easier for the companies to gain regulatory approval as it avoids weakening competition in some markets and leaves Rite Aid as a viable player, said Neil Saunders, managing director of market research business GlobalData Retail.

'Walgreens and Rite Aid have taken a pragmatic approach,” Saunders said.

Walgreens on Thursday also ended a related deal to sell as many as 1,200 Rite Aid stores to Fred's Inc.

Walgreens, the biggest drugstore chain, had said in October 2015 that it would buy No. 3 Rite Aid for $9.5 billion. It decided to end the deal after the Federal Trade Commission said it would not give the deal antitrust approval, Walgreens said in a media statement.

Rite Aid, which had nearly 4,600 stores in the United States as of May, said the stores to be sold are mainly in the Northeast, Mid-Atlantic and Southeast. The deal also includes distribution centers in Connecticut, Philadelphia and South Carolina.

The decision to sell 2,186 Rite Aid stores will weaken the chain and could still be controversial, said David Balto, an antitrust lawyer who had worked with groups opposing Walgreens' takeover of Rite Aid.

'Rite Aid's future is going to be bleak after they sell these stores. This is still going to raise some serious questions. It's still taking out a major competitor,” Balto said.

The FTC said on Thursday it would review the new proposal.