Shopping Centers Today International

DEC 2015

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Page 19 of 143

T H E C O M M O N A R E A 20 S C T / D E C E M B E R 2 0 1 5 Store closings ahead after Walgreens–Rite Aid merger Walgreens says that it is pre- pared to sell off up to 1,000 stores in order to bring its $17.2 billion bid for Rite Aid to fruition, if that is what is demanded by federal government regulators. Wal- greens Boots Alliance Inc. last week placed the bid on Rite Aid, which has 4,600 stores in 31 states plus the District of Columbia. Wal- greens has 8,232 U.S. stores in all 50 states. The merger would save about $1 billion through operational syner- gies, Walgreens says, and would create a combined chain that is larger than CVS. The deal is expected to close in the middle of 2016. CVS has 7,800 stores, but a market share of 58.1 per- cent, and is buying Target's 1,700 units, pending regula- tors' approval, notes Garrick Brown, a vice president of re- search at Cushman & Wake- field. This is a major factor in Walgreens' decision to go after Rite Aid, he says in a report on the deal released Wednesday. "The deal makes a lot of sense for both Walgreen's and Rite Aid," Brown writes. "It effectively combines the nation's second- and third- largest drug store chains; Walgreens' 31 percent mar- ket share is followed by Rite Aid's 10.3 percent." The merger would make Walgreens especially domi- nant in New York and Cali- fornia. In 2010 Walgreens bought Duane Reade for $1.1 billion. While Duane Reade and Rite Aid will continue to operate under their own names, "decisions will be made over time re- garding the integration of the two companies, ulti- mately creating a fully har- monized portfolio of stores and infrastructure," Wal- greens said in a prepared statement. Cushman's Brown pre- dicts that the deal could eventually result in a total of 3,000 stores closing be- cause of overlap. "The good news for landlords is that this will almost certainly happen over the course of years, not months," Brown writes. "I believe that in most cases that Walgreens will seek to close these re- dundant stores as leases ex- pire or they will strategically look to buy their way out of older leases." "The volatility of retail sales is more interesting from a retailer's point of view, less from a landlord's." — David E. Simon, chairman & CEO, Simon, explain- ing the long-term nature of leases to Wall Street analysts '' Walgreens will seek to close these redundant stores as leases expire or they will strategically look to buy their way out of older leases. " W A L G R E E N s c o u L d s E L L A s m A N y A s 3 , 0 0 0 s t o R E s A f t E R b u y i N G R i t E A i d .

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