unnamed-5VOGELHOOD ACCURATELY PREDICTS STORE DIVESTITURE COUNT NEARLY A YEAR IN ADVANCE; MERGERANX™ SCORE INCREASES IN Q1 2017

Overview

On October 27, 2015, Walgreens Boots Alliance (WBA) announced its plan to buy its rival Rite Aid (RAD) for $17.2 billion. VogelHood’s HHI™ analysis suggests the deal falls into Level 2 (171-500 HHI change) category, indicating moderate antitrust scrutiny. The MERGERANX™ score has increased from 0.85 on the deal announcement date to 0.88 as of the fourth quarter of 2016; political engagement statistics suggest regulatory approval.

MERGERANX™: Walgreens Boots Alliance (WBA) and Rite Aid (RAD)

      • VogelHood’s MERGERANX™ model examines correlations between policy engagement and transaction approval history to predict regulatory approval outcomes. In 2016, Rite Aid had a lobbying engagement of $1.15 million. Over the same period, Walgreens Boots had a lobbying engagement of $4.42 million.
      • Combined, Walgreens Boots and Rite Aid gave $137,255 at the state level and $1,296,439 at the federal level. Both the lobbying engagement and campaign engagement fall below the overall benchmarks but exceed the consumer peer group averages, generating a score 0.88. Statistically, this meets VogelHood’s MERGERANX™ thresholds for success.

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Reasons Why The Merger Will Be Approved

      • Statistics demonstrate that the companies are in a favorable position to receive approval from regulators. With a 0.88 MERGERANX™ score, regulators are likely to allow for the merger to consummate.
      • The FTC will take a wide view of competitive landscape, including supermarkets in their HHI calculations.

Key Risk Factors & Recent Developments

      • On February 15, 2017, it was reported that instead of the previously 865 stores of the divestitures plan, Walgreens said they would sell up to 1,200 stores to Fred’s. This is in accordance with VogelHood’s divestiture prediction on April 16, 2016; in the report Vogelhood predicted that “Walgreens and Rite Aid need to divest 1,125 stores in U.S. to receive antitrust approval”.
      • On February 27, 2017, according to the antitrust sources, the transaction is likely to receive antitrust approval very soon.

 

Screen Shot 2016-08-10 at 3.02.46 PMSamir N. Kapadia
Managing Director | VogelHood Group
samir@vogelhood.com

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