Supermarket chain Kroger Co is
questioning whether to proceed with buying divested stores from
Walgreens Boots Alliance Inc as part of its proposed
acquisition of Rite Aid Corp, a source familiar with the
situation said on Wednesday.
Cincinnati, Ohio-based Kroger's hesitation casts uncertainty
on the future of the $9.4 billion Walgreens-Rite Aid deal, which
need approval from antitrust authorities, who have pushed back
against a number of large deals this year.
The Federal Trade Commission (FTC) has told Kroger it would
not have the option to close and integrate Rite Aid stores that
are near Kroger locations, the source said. Kroger had concerns
over the financial feasibility of such a set-up, as Rite Aid and
Kroger have some overlap in products they sell, the source said,
asking not to be named as the matter is confidential.
Kroger and Walgreens representatives declined to comment.
Walgreens said in early September it would likely have to
divest between 500 and 1000 stores, more than its previous
estimate, to win regulatory approval for its planned
acquisition. Walgreen operates about 8,100 stores in the United
Kroger had indicated to Rite Aid it had an interest in
buying some of the divested stores, the source said.
To be sure, it remains possible that other buyers, such as
private equity firms, may step in to buy the stores if Kroger
opts not to pursue a deal. It is not clear, however, whether
another supermarket operator will step in, said David Balto, an
"An acquisition (of the divested assets) by a supermarket
would be a substantial challenge because it's outside their
normal area of expertise," he said.
"Pharmacies are the most competitive part of the health care
system. Because of that, acquiring pharmacies may not be that
attractive [for a grocery operator]" he added.
Walgreens said in October it would acquire smaller peer Rite
Aid to widen its footprint in the United States and negotiate
for lower drug costs.
The New York Post first reported on Kroger's concerns.