Chatter continued throughout the week that Rite Aid could be an acquisition target for Walgreens Boots Alliance after company executive vice chairman and acting chief executive officer Stefano Pessina said he’s eyeing U.S. deals.
The speculation pushed Rite Aid shares up more than 5 percent on Wednesday on the New York Stock Exchange. They opened today at $8.27.
The talk is a reprise from last year when Walgreens was reportedly pursuing Rite Aid. While industry analysts believe Rite Aid would get Walgreens more bang for its buck than hobbling together mom-and-pop stores or small chains, many in the industry tell a more cautionary tale. For one thing, Walgreens already has big debt to digest — and Rite Aid is considered leveraged by many gauges. Additionally, industry experts note that many markets have stores that overlap, raising concern over the number of doors that could have to be closed. Others noted that Rite Aid has some weak locations that wouldn’t complement Walgreens’ formats.
From a beauty standpoint, the marriage could further damage a weak mass cosmetics market. “It would be better that both companies stayed independent as they have taken different approaches to proprietary brands. Chain drugstores have been drifting away from beauty to becoming convenience stores where they sell food and household products, and a combined chain would hasten that trend away from cosmetics,” said industry consultant Allan Mottus.