Walgreens to take over 185 Fred's pharmacies

Dive Brief:

Walgreens is acquiring pharmacy patient prescription files and pharmacy inventory of 185 Fred's stores located across 10 Southeastern states for $165 million, according to a press release from the companies.
Fred's retail operations will remain at most of those locations and the company will continue to operate 162 pharmacies across nearly 600 stores. Pharmacy staff at the closing locations can apply for available positions at Walgreens, the company said.
The transaction is part of Fred's previously announced effort "to unlock shareholder value by monetizing non-core assets through strategic transactions," according to the release. The file transfers are expected to begin in the fourth quarter this year and be completed in the first quarter of next year, the companies said.

Dive Insight:

The ongoing dissolution of much of Fred's pharmacy operations is a stark departure from the retailer's ambitions when a merger of Walgreens and Rite Aid still seemed possible.

A little over a year ago, Fred's was looking at a major expansion because it had agreed to take on 865 Rite Aid stores across the eastern and western U.S. for $950 million in cash. The deal would have positioned Fred's as the third-largest drugstore chain in the U.S., after Walgreens and CVS. Taking on those Rite Aid stores (an unsuccessful move designed to assuage antitrust regulators to smooth approval of the merger) would have been a stretch for Fred's, and some analysts were skeptical from the get-go.

But it's all moot now, and Fred's is adjusting its ambitions in the aftermath of that failed merger. "With this agreement, we have taken a major step towards achieving one of our main goals of eliminating our debt balance," Fred's Interim CEO and CFO Joe Anto said in a statement on Monday.

The deal furthers Walgreens' scaled-back ambitions in light of the failed merger attempt. Despite it, Walgreens has acquired 1,932 Rite Aid stores and three Rite Aid distribution centers and related inventory. The drugstore retailer is also in the midst of shuttering 600 U.S. stores and related assets.

The move to have Walgreens pharmacies within Fred's stores has a precedent. Target in 2016 sold off its pharmacy operations to CVS Health, which now runs those operations within Target stores.