CAMP HILL, Pa. (WHTM) – The parent company of Walgreens announced Tuesday it will buy Cumberland County-based Rite Aid to form the biggest drug store company in the nation.
The deal is valued at $17.2 billion: $9.41 billion in cash, and the rest in acquired debt.
Business analysts say it’s a big loss for central Pennsylvania.
Rite Aid is the biggest corporation in the Midstate by retail volume. Assuming the deal gets over the final hurdles, that will no longer be the case. Instead, it will become a “wholly owned subsidiary of Walgreens Boots Alliance,” Rite Aid said in a news release.
“Rite Aid was founded here, it grew up here,” said David Black, president and CEO of the Harrisburg Regional Chamber. “It’s got deep roots.”
He said the chain is part of the Midstate’s identity.
“They’ve had a major influence. They’re involved with who we are as a community, and you don’t want to lose a good corporate citizen.”
Black estimates the corporate office employs around a thousand people. Their jobs may be eliminated.
“Walgreens will want to be installing its people and calling those shots,” said Michael Hussey, a business and tax law professor at Widener University’s Commonwealth Law School in Harrisburg.
As for the workers at Rite Aid’s nearly 4,600 stores across the country, they should be okay.
“Walgreens will need them to keep doing that to keep the entire operation going,” at least for now, Hussey said.
Even the Rite Aid name won’t disappear just yet: The drug store chain wrote in the news release the new subsidiary “is expected to initially operate under its existing brand name. Working together, decisions will be made over time regarding the integration of the two companies.”
“It would be a question about what Walgreens thinks is going to generate the most customer loyalty and present best to its customer base, in terms of clarity about who it is and where your prescriptions are and where they’re being refilled,” said Hussey.
Some existing Rite Aid stores will likely have to close where there’s too much overlap between the two brands. Federal anti-trust protections may force more closures.
In terms of tax revenue, though, the impact should be fairly small, Hussey said, because businesses pay taxes in every state in which they operate.
Still, the Midstate is losing a major player. “I think it’s something for us here in the region to be concerned about,” said Black.
Rite Aid expects the transaction to close by the second half of next year.