Walgreens Buys Rite-Aid – Impacts On The Canadian Market?

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    As reported on Tuesday, Walgreens Alliance Boots has purchased Rite-Aid bringing together the #1 (Walgreens) and #3 (Rite-Aid) drug store chains in the United States in a mega deal signalling consolidation in the drug sector in the US.

    Read more about the deal here.

    It is interesting to note that Walgreens also already owns Boots, the largest drug store chain in the United Kingdom and the exporter of control labels such as Boots No.7 skin care line up.

    Now that Walgreens will be busy digesting Rite-Aid, it is interesting to think about what the next step will be for CVS, the #2 drug store chain in the United States.

    It is not out of the realm of possibility for CVS to look at Canada as the next step for expansion. While both Rexall and Jean Coutu have been rumoured to be “available” for sale given the right offer, now that SDM is settling in nicely with Loblaw, our bet would be on Rexall as the best possible fit with CVS.

    Rexall’s strength in Ontario and Western Canada and its health and wellness focus would be a good match for CVS and not have the difficulties of learning a new language and culture which would be required if they were to pursue PJC.

    Although Target definitely bit off more than they could chew with the Zellers acquisition, we feel that US retailers will continue to look at Canada as an expansion opportunity and now that the Canadian dollar is trading very low, a US player could benefit from scooping up Canadian assets at a discount.

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