Research Article

DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?

Volume: 11 Number: 4 December 31, 2022
  • Khamis M. Bılbeısı *
  • C. R. Narayanaswamy
Journal of Business Economics and Finance Cover
Journal of Business Economics and Finance
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DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?

Abstract

Purpose- After several attempts that extended over two years, in 2017 the U.S. Federal Trade Commission approved Walgreens’ proposal to buy nearly half of Rite Aid stores. The two companies were in the same line of business making the merger fall in the category of horizontal mergers. The main benefits of horizontal mergers are cost savings from improved operational efficiency and superior bargaining power with respect to suppliers. Using annual financial statements, we examined the performance of Walgreens and Rite Aid over the four-year period since the acquisition of Rite Aid stores by Walgreens. The examination is useful because the Federal Trade Commission was not in favor of Walgreens’ earlier proposal to merge completely with Rite Aid, but later allowed it to buy almost half of Rite Aid stores. The present study examines whether the revised proposal benefitted both Walgreens and Rite Aid. Methodology- We collected annual financial statement data of the two companies from Mergent database and analyzed the common size statements and the relevant financial ratios. Findings- Analysis of profitability ratios indicate profit margins (gross as well as net) continued to decrease for both companies even after the acquisition. Both companies showed improved operational effeciency as reflected in Inventory turnover and employee productivity, but Walgreens had a superior performance. Conclusion- Only four years have passed since Walgreens acquired Rite Aid stores. Our analysis of the limited data indicates that Walgreen seems to have benefitted more from the deal. Rite Aid, by selling about 46% of its stores to Walgreens in 2017, became a much smaller company. The smaller size did not affect the cost of inventory or financing, but its profitability did not improve.

Keywords

References

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Details

Primary Language

English

Subjects

Economics, Finance, Business Administration

Journal Section

Research Article

Authors

Khamis M. Bılbeısı * This is me
0000-0002-0907-9582
United States

C. R. Narayanaswamy This is me
0000-0003-2877-0333
United States

Publication Date

December 31, 2022

Submission Date

September 24, 2022

Acceptance Date

November 29, 2022

Published in Issue

Year 2022 Volume: 11 Number: 4

IZ

https://izlik.org/JA29LT97ZD

Cite

RIS / Bibtex
APA
Bılbeısı, K. M., & Narayanaswamy, C. R. (2022). DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL? Journal of Business Economics and Finance, 11(4), 185-194. https://izlik.org/JA29LT97ZD
AMA
1.Bılbeısı KM, Narayanaswamy CR. DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL? JBEF. 2022;11(4):185-194. https://izlik.org/JA29LT97ZD
Chicago
Bılbeısı, Khamis M., and C. R. Narayanaswamy. 2022. “DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?”. Journal of Business Economics and Finance 11 (4): 185-94. https://izlik.org/JA29LT97ZD.
EndNote
Bılbeısı KM, Narayanaswamy CR (December 1, 2022) DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL? Journal of Business Economics and Finance 11 4 185–194.
IEEE
[1]K. M. Bılbeısı and C. R. Narayanaswamy, “DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?”, JBEF, vol. 11, no. 4, pp. 185–194, Dec. 2022, [Online]. Available: https://izlik.org/JA29LT97ZD
ISNAD
Bılbeısı, Khamis M. - Narayanaswamy, C. R. “DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?”. Journal of Business Economics and Finance 11/4 (December 1, 2022): 185-194. https://izlik.org/JA29LT97ZD.
JAMA
1.Bılbeısı KM, Narayanaswamy CR. DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL? JBEF. 2022;11:185–194.
MLA
Bılbeısı, Khamis M., and C. R. Narayanaswamy. “DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL?”. Journal of Business Economics and Finance, vol. 11, no. 4, Dec. 2022, pp. 185-94, https://izlik.org/JA29LT97ZD.
Vancouver
1.Khamis M. Bılbeısı, C. R. Narayanaswamy. DID WALGREENS AND RITE AID BENEFIT FROM THEIR 2017 DEAL? JBEF [Internet]. 2022 Dec. 1;11(4):185-94. Available from: https://izlik.org/JA29LT97ZD

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