Rite Aid

Shares of Walgreens Boots Alliance and Rite Aid fell Friday amid rumblings that the U.S. Federal Trade Commission was worried the drug store chains’ proposed merger would hurt competition under the current plan.

Walgreens stock slipped more than 2 percent in midafternoon trading to $81.53, and Rite Aid stock tumbled more than 11 percent to $7.57. Reports circulated on Friday that the FTC was not convinced that the companies’ current proposal — to sell 865 stores to Fred’s Pharmacy — was enough to preserve competition following their proposed combination, Bloomberg first reported, citing people familiar with the deal. Walgreens declined to comment.

Walgreens had said it expected to close the Rite Aid merger, originally unveiled in October 2015, early this year. As part of that plan, the parties said in late December that Rite Aid would sell 865 locations to Fred’s Pharmacy for $950 million, which would make Fred’s the third-largest drugstore chain.

If the deal didn’t go through, the ramifications would be harsher for Rite Aid than for Walgreens, according to retail analyst Neil Saunders, chief executive officer of Conlumino.

For Walgreens, not buying Rite Aid in the planned $9.4 billion transaction would put a “hole” in its growth plans, which have been affected in Europe by the strong dollar, Saunders said. Earlier this month, Walgreens raised its financial guidance for 2017, though it reported slight drops in both earnings and net sales for the quarter. The business called beauty out as a bright spot, offsetting declines in other categories.

“Rite Aid is the laggard really in the pharmacy space, its stores aren’t particularly strong, it doesn’t have the financial muscle to do some of the clever things around health and wellness that CVS and Walgreens are doing,” Saunders said. “In some ways, it’s treading water waiting for this deal to happen.”

It’s also possible that the FTC could put further conditions on the companies in order for the transaction to go through. If the deal were blocked, it wouldn’t be the first retail transaction to be nixed recently — the proposed Staples/Office Depot merger was denied in 2016, with the a judgement that the deal would be bad for competition.

But for Walgreens and Rite Aid, the shift in administrations in Washington, D.C., could also play a part, Saunders said.

“The FTC under Obama would be much more likely to say the deal couldn’t go through than under Trump,” he said. “That could change things, though there’s a very fine line — the executive [branch] can’t be too political and get involved — but it does set a general tone.”