If Walgreen's bid for Rite Aid is approved, the company could close far more stores than anticipated, according to an analysis by real estate services company Cushman & Wakefield.
Walgreens Boots Alliance (NASDAQ:WBA) said it would buy Rite Aid for $17 billion in cash and assumed debt. Rite Aid operates 4,600 stores in 31 states, and the combined company could boast a network of nearly 13,000 U.S. locations. That's far more than No. 2 CVS operates.
In order to appease the Federal Trade Commission, Walgreens said it would consider shuttering 1,000 locations to get the deal done. But a new analysis of the store base by Garrick Brown, VP of research at Cushman reveals an additional 2,000 locations that would be closed due to proximity and overlap, according to Fortune.
Brown found 14 states with overlap so high that a combined company would close to double the store count.
"The post-merger Walgreens real estate imperative will be to minimize cannibalization," Brown wrote. "Who will win in those instances? In most cases, it will be the Walgreens location simply because Walgreens sales per square foot are typically higher."
Why go forward with merger? To acquire the retail pharmacy customers, the bread and butter of a drugstore chain, and to keep rival CVS from getting the same as the competition gets more intense between the No. 1 and No. 2 chains.
-See this Fortune article
Walgreens enables Apple Pay for Rewards members
Walgreens could close 1,000 stores
Walgreens acquires Rite Aid for $17B
Walgreens offering up same-day delivery
Walgreens partners with health care provider for 25 in-store clinics