To The Rescue: Cerberus Capital Riding In To Save Rite Aid?

Cerberus Capital, a major private equity player, has entered its name into the ongoing Walgreens Boots Alliance Inc WBA–Rite Aid Corporation RAD merger saga.

Retail Sales

As part of the proposed acquisition of Ride Aid by Walgreens, the two companies would need to divest hundreds of retail locations to appease the relevant regulatory bodies. A deal was reached with drug chain Fred's, Inc. FRED but concerns grew over the deal as it implies Fred's would transform from a regional chain to a bona fide national pharmacy chain with a footprint across the country.

According to the New York Post, Cerberus was actually bidding against Fred's for the retail locations through the grocery store Albertsons it owns. However, Cerberus lost out to Fred's, even though it presented a superior offer.

Insiders close to the deal told the Post that buyout firms such as Cerberus typically do not restore competition to a sector as after a few years of operating the acquired asset it will start looking to sell it for a profit.

Nevertheless, Cerberus is still interested in buying the hundreds of retail chains that Walgreen's and Rite Aid need to sell.

Could The Deal Fall Apart?

Meanwhile, as part of the initial merger agreement, Walgreens or Rite Aid can walk away from the merger as soon as Friday but neither company is interested in doing so.

"I'm not aware of the Walgreen's merger being in danger of collapsing," a source with direct knowledge of the deal told the Post.

In fact, since Cerberus is still interested in buying the retail locations, the Federal Trade Commission won't be taking action to block the merger.

Shares of Walgreens were trading higher by 0.41 percent at $81.60 following the report. At the same time shares of Rite Aid were trading higher by 0.29 percent at $6.80 after hitting a 52-week low of $6.26 earlier in the trading session.

Shares of Fred's were lower by 4.43 percent at $13.84.