Walgreens Boots Alliance Inc (NASDAQ: WBA)'s acquisition of Rite Aid Corporation (NYSE: RAD) has come under a cloud of uncertainly following a Bloomberg article, Baird’s
Eric W. Coldwell said in a report. He added that the deal was thought of as “highly likely,” Rite Aid’s agreement
to divest 865 stores to Fred's, Inc. (NASDAQ: FRED).
Without specifically citing a source, the Bloomberg report mentioned Federal
Trade Commission officials were concerned Rite Aid's agreement to sell stores to Fred’s did not “go far enough to preserve
competition.” Coldwell pointed out that the purchase agreement stipulated that Fred’s would buy any additional divestitures
required by the FTC.
“However, FTC may also be concerned with Fred’s ability to integrate and operate a much larger pharmacy operation,” Coldwell
mentioned. The merger agreement was scheduled to be completed Friday.
Takeaways
The analyst mentioned that Walgreens’ FY 2017 guidance reflected $0.05–$0.12 for a partial year of Rite Aid. “Our model includes
$0.06 in FY 2017 (1.2 percent of estimate), $0.33 in FY 2018 (5.7 percent of estimate), and $0.60–$0.70 by year four.”
Coldwell added that the transition of Rite Aid volumes would likely take longer than was earlier anticipated, and “outcomes
around who ultimately wins/retains what and when remains cloudy.” He added that the increased uncertainty was “a negative for
sector valuation.”
Baird has an Outperform rating on Walgreens.
Latest Ratings for WBA
Date |
Firm |
Action |
From |
To |
Oct 2016 |
Wells Fargo |
Initiates Coverage On |
|
Outperform |
Oct 2016 |
Jefferies |
Upgrades |
Hold |
Buy |
Oct 2016 |
UBS |
Initiates Coverage on |
|
Buy |
View More Analyst Ratings for
WBA
View the Latest Analyst Ratings
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.