Rite Aid Corporation (NYSE:RAD) has reached an agreement to acquire 130-year old Bartell Drugs in a deal worth $95 million. The acquisition marks the end of the road for the iconic drug store that opened its first store in Seattle in 1890. The deal is expected to close at the end of the year.
Bartell Drugs Acquisition
Bartell Drugs says it accepted Rite Aid advances on struggling amid rising costs owing to the COVID-19 pandemic. The local drug store also cited rising Seattle business taxes that made the business Untenable.
It Joins Rite Aid, one of the Fortune 500 companies with 69 stores in King, Pierce, and Snohomish counties. On its part, Rite Aid maintains a robust footprint with more than 2,500 stores in 19 states. The giant drug store has confirmed it does not plan to close any Bartell locations, let alone lay off employees. However, there may be a consolidation of jobs on the corporate level.
Rite Aid Expansion Plans
The acquisition accords Rite Aid an opportunity to gain access to important growth markets. Rite Aid CEO expects the marketplace to allow the two companies to co-exist. The acquisition comes three years after the Camp-Hill based company sold almost half of its stores to Walgreens after a failed merger.
Rite Aid has been looking for ways to strengthen its prospects in the industry after being left in a weaker position following the botched $9.4 billion Walgreens Boots Alliance Inc. (NASDAQ: WBA) merger. In the recent past, the drug chain has tried to strengthen its footprint with a proposed deal to acquire Albertsons' grocery chain. Its $24 billion proposed deal fell apart amid investor opposition.
Rite Aid also suffered a major blow last year when credit rating firm Fitch downgraded the company‘s debt citing the lack of national scale, which put the company at a great disadvantage compared to CVS and Walgreens.
In the aftermath of the Bartell’s Drugs deal, Rite Aid has updated its 2021 guidance. The company expects its capital expenditure to be between $300 million and $325 million, with free cash flow expected at between $60 million and $135 million.