A union representing 6,000 Rite Aid Corp. workers is opposing the drugstore chain’s proposed tie-up with Walgreens Boots Alliance Inc., arguing the companies’ efforts to address antitrust concerns don’t go far enough.
According to 1199SEIU United Healthcare Workers East, which says it represents over 400,000 U.S. hospital, pharmacy and other health-care workers, Walgreens’s and Rite Aid’s plan to sell at least 865 stores to regional chain Fred’s Inc., would leave the U.S. drugstore market with too few competitors.
“Even with the proposed reduction, Walgreens’s postmerger increased market share will create conditions which are conducive to abuse of power, and that will ultimately injure competition, innovation, consumers and workers,” Veronica Turner-Biggs, the union’s senior executive vice president, said in a letter to Deborah Feinstein, head of the Federal Trade Commission’s Bureau of Competition.
Walgreens and Rite Aid have been trying to get the FTC to sign off on the deal, struck in October 2015, and on Monday agreed to consider selling more stores in an effort to satisfy regulators.
Walgreens agreed to buy Rite Aid for $9 a share, or about $9.4 billion, to form a drugstore chain with more than 10,000 U.S. stores. The antitrust concerns include that such a big company could hold too much sway in negotiations with pharmacy-benefits managers handling corporate and government drug plans.
Under new terms announced this week, the deal would value Rite Aid between $6.8 billion and $7.4 billion, depending on how many stores the two companies divest.
Ms. Turner-Biggs, in her letter, argued that even with the additional 865 stores, Fred’s would be too small to compete with Walgreens or CVS Health Corp., another drugstore giant.
She said in an interview that the union decided to oppose the deal after failing to win assurances from Rite Aid that the newly combined company would commit to worker safeguards and restraint on pricing. The union represents Rite Aid pharmacists, technicians and cashiers at stores in the New York region.
The FTC has increased its scrutiny of buyers of divested assets since 2015, when it allowed Safeway Inc. and Albertsons to merge provided they sold 168 stores to a smaller grocery chain, Haggen Holdings LLC. Haggen filed for bankruptcy protection months later, prompting Albertsons to buy some of the divested stores back.
About 26% of Rite Aid workers are represented by a union, according to the company. The SEIU affiliate doesn’t represent Walgreens workers.
The two companies have until the end of July to complete the deal, after they extended the deadline earlier this week.
Source: The Wall Street Journal