Walgreens-Rite Aid Merger Is In Some Trouble Thanks To Kroger

Walgreens Boots Alliance Inc's WBA proposed merger with Rite Aid Corporation RAD was unlikely to receive regulatory approval unless it took a series of actions, including divesting hundreds of properties.

Walgreens (the second-largest pharmacy chain) hoped to merge with Ride Aid (the third largest pharmacy chain) to overtake CVS Health Corp CVS.

Walgreens and Rite Aid said they would sell hundreds of stores to appease regulators and showed a willingness to divest up to 1,000 units. The companies were said to have engaged in talks with private equity buyers and even approached rival CVS to buy some of the units in cities it doesn't already operate.

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According to the New York Post, Walgreens and Rite Aid were also talking with the grocery chain Kroger Co KR to sell 650 units.

The New York Post said Kroger expressed interest in buying the retail locations and the size of the agreement could have been large enough to appease regulators.

However, a source close to the situation told the New York Post that the Federal Trade Commission told the grocery chain that the 650 stores can't be purchased and closed, with the operations moved inside the grocery stores.

"The FTC is trying to preserve the stand-alone stores," a source said. "But Kroger might want to integrate. What happens to Rite Aids it buys that are near Krogers?"

If no solution is found, the FTC can sue the companies to block the proposed merger.

Image credit: Mike Mozart, Flickr