Walgreens Boots Alliance rings better-then-expected profit on cost-cutting. It says it'll save even more by buying Rite Aid. Fred Katayama reports.
Walgreens Boots Alliance coming in with better-than-expected profit from massive cost-cutting, and it's on its way to cutting around $1 billion more. That's how much the drugstore chain operator expects to ultimately save by buying its smaller rival, Rite Aid, for $17.2 billion. The deal was announced on Tuesday. Rite Aid helps Walgreens broaden its store network in the United States, negotiate for lower drug costs, and vault past market leader CVS. But it will also attract antitrust watchdogs. Walgreens' CEO Stefano Pessina told analysts on an earnings call not to worry. He said, "We have done significant analysis on how we can bring the two companies together, including the antitrust analysis." But the company couldn't assess the divestitures needed to get the blessing of regulators. S&P revised its outlook on Walgreens' rating to negative, saying the Rite Aid deal will bring on too much debt. Moody's will review its rating for the same reason. Walgreens' shares initially went up on the news, but traded in the red on Wednesday. RiteAid shares gave back some of Tuesday's huge gains.