Fred’s, Inc. will acquire the stores following the acquisition of Rite Aid Corporation by Walgreens Boots Alliance Inc. FRED will be paying $950 million in cash for the locations. The deal is expected to close during the first half of 2017.
If Fred’s, Inc. get approval for the deal, it will mean a major expansion for the company. FRED currently has 650 locations across 15 states and there are 371 pharmacy locations inside its stores. The additional 865 stores being bought from Walgreens Boots Alliance Inc and Rite Aid Corporation will make it the third-largest drugstore chain in the United States.
“We believe the purchase of these stores will not only complement recent investments in our team members, processes, and technological infrastructure, but also positively impact our business and maximize shareholder value,” Michael K. Bloom, CEO of Fred’s, Inc., said in a statement.
Fred’s, Inc. intends to keep some current Rite Aid Corporation employees following the acquisition of the 865 stores. It will also operate the stores under the Rite Aid banner for 24 months following the acquisition while it transitions them to its own stores.
Fred’s, Inc. says the stores it is acquiring from Walgreens Boots Alliance Inc and Rite Aid Corporation represent its pre-divesture store performance in terms of revenue and EBITDA. It expects these stores to be accretive to its earnings and produce significant cash flow.
FRED stock was up 80% and RAD stock was up 5% as of Monday morning.