Drug store retailer, Rite Aid Corporation RAD has successfully closed its previously announced acquisition of TPG’s portfolio company, Envision Pharmaceutical Services (“EnvisionRx”) for roughly $2 billion.
Rite Aid paid partly in cash, nearly $1.8 billion, and the balance as stock including about 27.9 million shares for the transaction. The purchase price includes the value of an anticipated future tax benefit of $275 million.
EnvisionRx, being a pharmacy benefit management (“PBM”) company, offers transparent as well as traditional PBM services via its respective EnvisionRx and MedTrak PBM’s. Alongside, it provides fully integrated mail-order and specialty pharmacy services, an innovative claims adjudication software, access to the biggest cash pay infertility discount drug program countrywide and a national Medicare Part D prescription drug program.
With the addition of EnvisionRx to its portfolio, Rite Aid has further advanced the strategy of widening its retail healthcare platform and improving its health and wellness offerings. Management of Rite Aid believes that the coming together of EnvisionRx’s wide range of PBM and pharmacy-related businesses and the former’s retail platform will enable Rite Aid to provide pharmacy offerings via mail-order, specialty and retail networks to its customers and patients.
Post this acquisition, EnvisionRx will operate as Rite Aid’s wholly owned subsidiary, retaining its base in Twinsburg, OH. The company will also retain its existing management team, led by Frank Sheehy.
According to Rite Aid, the acquisition of EnvisionRx will be accretive to the former’s earnings in fiscal 2017. Looking ahead, this deal is most likely to drive Rite Aid’s growth and bolster its shareholder value.
Further, market sources are of the opinion that this deal will help Rite Aid to extend beyond retail, by adding PBM to its portfolio. However, its PBM business will be much smaller than that of CVS Health Corporation’s CVS, which acquired Caremark in 2007.
With Caremark’s pharmacy benefits, CVS holds the second position in the industry, following Express Scripts Holding Company ESRX. Now, with Rite Aid following the same path, Walgreens Boots Alliance Inc. WBA is the only major American pharmacy chain without a pharmacy benefit business.
Coming back to Rite Aid, we conclude that its established presence in the retail healthcare arena along with EnvisionRx’s innovative PBM, is likely to prove beneficial for the Zacks Rank #3 (Hold) company. This step will enhance its clientele and solidify its current business platform.
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