The trans-Atlantic drugstore operator said on Tuesday the combined company plans to sell at least 865 Rite Aid stores to small regional drugstore chain Fred’s (fred) for $950 million in cash. WBA said that if the FTC demanded a larger divestiture, Fred’s would be compelled to buy additional Rite Aid stores.
In October 2015, WBA, still digesting the merger between U.S. pharmacy chain Walgreens and Swiss-based Alliance Boots from earlier in the year, announced an all-cash deal that would create a 13,000 store behemoth—and one it claimed would give it clout with drugmakers to lower drug costs.
But the news, which would merge the No. 1 and No. 3 drugstore chains by store count, also aroused anti-trust concerns. And given how the U.S. Federal Trade Commission this year has pushed back at a number of mega-deals, notably scuttling Staples’ (spls) $5.5 billion plan this year to buy office supplies rival Office Depot (odp), it’s clear WBA didn’t want to take any chances.
WBA said in a statement it has been in talks with the FTC and still expects the merger to close in early 2017.
As recently as September, WBA said it would likely have to divest between 500 and 1,000 stores, more than its previous estimate of 500 locations, to win the FTC’s. Walgreens operates roughly 8,200 U.S. stores and competes most directly with CVS Health (cvs), which has a roughly the same amount of stores. Rite Aid has about 5,000 stores. And the deal seemed to be in trouble this fall when media reports suggested Kroger (kr), initially interested, backed off.
“We are pleased to have found an experienced pharmacy operator for these stores,” said WBA executive vice chairman and CEO Stefano Pessina. “With this agreement, we are moving ahead with important work necessary to obtain approval of our acquisition of Rite Aid.” (Please read Fortune‘s January 2016 profile of Pessina here.)
The deal would turn the long struggling Fred’s chain from a small regional player into one of the biggest national players with a much bigger presence on the East and West Coasts.