Rite Aid to sell 865 stores to Fred's

(Reuters) - Rite Aid Corp said it would sell 865 stores to Fred's Inc for $950 million to satisfy antitrust concerns over its proposed takeover by Walgreens Boots Alliance Inc.

Fred's shares jumped 73 pct to $19.34 in morning trading on Tuesday, while Rite Aid shares were up 5.6 pct at $8.63.

Rite Aid and Walgreens were widely expected to divest stores in states where the combined company would have a particularly strong position.

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A Walgreens is shown October 27, 2015 in Boulder, Colorado. Walgreens Boots Alliance will acquire Rite Aid for $9.4 billion in cash in a deal announced today that combines the largest U.S. drugstore chain Walgreens with the nation's third largest.

(Photo by Justin Sullivan/Getty Images)

Full service in a wide range of retail fields at the new Walgreen drug stores; in new Villa includes a Walgreen tradition of full prescription services, at low cost made possible by the firm's Specialization in the field. Here are Dennis Novak and Jerrold R. Fox, Pharmacists and the men who will head this new west Walgreen outlet.

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Walgreens employees celebrate the opening of their 4000th store.

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SAN FRANCISCO, CA - JULY 09: A pedestrian walks by a Walgreens store on July 9, 2015 in San Francisco, California. Walgreens Boot Alliance Inc. reported better than expected third quarter profits with net earnings of $1.3 billion, or $1.18 per share, compared to $714 million, or $0.74 per share one year ago. (Photo by Justin Sullivan/Getty Images)
NEW YORK - FEBRUARY 17: A man walks outside of a Duane Reade drugstore February 17, 2010 in New York City. Walgreen Corporation announced that it will buy the New York City-based drugstore chain for $1.1 billion in cash. (Photo by Chris Hondros/Getty Images)
Pedestrians walk past a Walgreens Boots Alliance Inc. store in New York, U.S., on Wednesday, June 10, 2015. Walgreens is redoing its stores with what's meant to be a more appealing cosmetics area with a wider array of products, even as it scales back its fresh food offering. Most prominent will be the companys own Boots No7 skincare line, which has proved successful at drawing customers to stores in Europe. Photographer: Michael Nagle/Bloomberg via Getty Images

Shoppers look at items on sale at a Walgreens store in New York, U.S., on Monday, March 23, 2009. Walgreen Co., the second-largest U.S. drugstore chain, jumped the most in almost five months in New York trading after second-quarter profit and sales exceeded analysts' estimates.

(Photo by Andrew Harrer/Bloomberg via Getty Images)

Walgreens opens a new store on Forest Ave. in Portland.

(Photo by John Patriquin/Portland Press Herald via Getty Images)

Walgreen's balloons sit atop a display at a Walgreen's store in New York, U.S., on Wednesday, Feb. 17, 2010. Walgreen Co., the biggest U.S. drugstore chain, agreed to buy Duane Reade Holdings Inc. from affiliates of Oak Hill Capital Partners for $618 million to expand in metropolitan New York.

(Photographer: JB Reed/Bloomberg via Getty Images)


Walgreens has 13,200 stores, nearly 60 percent of which are in the United States, while Rite Aid has 4,570 stores in the United States.

Walgreens said in October 2015 it would buy smaller peer Rite Aid for $9.4 billion to widen its U.S. footprint.

Fred's will continue to operate the acquired stores under the Rite Aid banner during the transition period, the companies said on Tuesday.

Walgreens said it continues to expect the acquisition to realize savings of over $1 billion within three to four years after the closing of the deal, which is expected in early 2017.

Fred's said BofA Merrill Lynch and Regions Bank will provide financing for store acquisitions.

Fred's was advised by A.T. Kearney. BofA Merrill Lynch was the financial adviser for Walgreens Boots Alliance, while Citi advised Rite Aid.

(Reporting by Gayathree Ganesan and Komal Khettry in Bengaluru; Editing by Anil D'Silva and Saumyadeb Chakrabarty)

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