Fred's Shares Up Sharply on Pharmacy Deal with Walgreens -- Update
September 10 2018 - 12:09PM
Dow Jones News
By Michael Dabaie
Shares of Fred's Inc. (FRED) surged Monday after Walgreens Boots
Alliance Inc. (WBA) agreed to acquire the pharmacy patient
prescription files and related pharmacy inventory of 185 Fred's
stores across 10 Southeastern states.
Fred's stock rose 68% to $2.74 in recent trading on heavy
volume. Walgreens was up 0.9% at $68.78.
Under the asset-purchase agreement, Walgreens would pay Fred's
$165 million, subject to adjustment, plus an amount equal to the
value of related pharmacy inventory.
Fred's will continue to operate its retail stores at most of
these locations after the pharmacies close. Once the transaction is
complete, Fred's will continue to operate about 162 pharmacies
across nearly 600 stores. Fred's pharmacy staff at the closing
locations will be able to apply for any available positions at
Walgreens.
The companies expect the file transfers to begin in the fourth
quarter and be completed in the first quarter of 2019.
"With this agreement, we have taken a major step towards
achieving one of our main goals of eliminating our debt balance,"
said Joe Anto, interim chief executive and chief financial officer
of Fred's.
Last year, Walgreens terminated a deal to sell 865 Rite Aid
stores to Fred's. That move came after Walgreens and Rite Aid Corp.
(RAD) scrapped their original $9.4 billion merger agreement.
Instead, to address regulatory issues, Walgreens completed the
purchase of 1,932 stores and related assets from Rite Aid for $4.16
billion in cash earlier this year.
Fred's earlier this year closed the sale of specialty pharmacy
unit EntrustRx to a subsidiary of CVS Health (CVS). Shortly after,
the company said it hired PJ Solomon & Co. to look at a sale of
its retail pharmacy script portfolio.
--Aisha Al-Muslim contributed to this article
Write to Michael Dabaie at michael.dabaie@wsj.com
(END) Dow Jones Newswires
September 10, 2018 11:54 ET (15:54 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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