RITE AID ACQUIRES BARTELL DRUGS
Bartell’s is one of the last remaining privately-held retail drugstore chains
In an unexpected move, Rite Aid (NYSE: RAD) has announced it is acquiring the privately-held, family-owned and operated Bartell Drugs retail pharmacy chain for $95 million. The deal will add 67 stores to Rite Aid’s 2,500 pharmacies.
Bartell Drugs was in operation for over 120 years
Bartell Drugs was founded in 1890 and its stores are centered around the greater Seattle marketplace. The independent pharmacy chain was under heavy competition from Costco, CVS, Walgreens and Walmart as well as from pharmacy benefit manager (PBM) mail order pharmacy rivals operated by UnitedHealth Group, Aetna (CVS), Express Scripts (Cigna), Huma, Prime Therapeutics and others plus the growing success of grocery chain Kroger’s in-store pharmacy units. Walgreens, CVS and Walmart are also diversifying their business models by adding immediate and primary care patient services to their stores. Bartell’s record of success as a business is admirable as many other pharmacies larger than it succumbed to competition either through bankruptcy or mergers and acquisitions within the last 20 years.
Rite Aid seizing an opportunity to regain market share
Rite Aid is seeking to regain business momentum during tough times in the retail pharmacy marketplace. It sold 1,932 stores to Walgreens in 2017 for $4.4 billion and continues to battle CVS, Walgreens, mass merchandisers and mail order pharmacies for prescription drug and consumer retail business. Founded in 1962 and based in Camp Hill Pennsylvania, Rite Aid has stores in 19 states.
Pharmacy competition continues to thicken with Amazon’s growth
As retailers, Walgreens, Costco, CVS, Rite Aid, Walmart and Kroger share a competitor in Amazon and its PillPack unit. Amazon continues to steadily fortify PillPack’s position as this year it signed strategic partnerships with 2 PBMs. As the pandemic progresses and Amazon’s business grows through its online business model as well as its Whole Food’s grocery unit, it is a constant threat in multiple consumer product categories and it is cultivating a growing presence in various healthcare sectors as well. Rite Aid’s purchase of Bartell puts them in the backyard of Amazon’s hometown.
Rite Aid continues to compete in a challenging marketplace and a demanding investor community
The acquisition of Bartell Drugs was an affordable and compact one for Rite Aid. It is surprising Walgreens or CVS did not snap up Bartell before Rite Aid did. With over 2,000 stores in the United States, Rite Aid is still very much a viable competitor in the chain drug pharmacy sector. As does its competitors, Rite Aid has options to grow its store base as well as selectively modify its core business model on its own or by a collaborative partner. With the right strategy and assertive management, Rite Aid can grow its business and deliver value for its shareholders.
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