Image source: Rite Aid.

What happened

Shares of drug store chain Rite Aid (NYSE:RAD) slumped on Friday after Bloomberg reported that the Federal Trade Commission was not satisfied with Walgreens' (NASDAQ:WBA) plan to gain antitrust clearance for its proposed acquisition of the company. At 2:45 p.m. EST, Rite Aid stock was down 11%, while shares of Walgreens had slumped 2.5%.

So what

In order to gain antitrust clearance for the acquisition, Walgreens had planned to sell 865 drugstores to Fred's. According to Bloomberg's sources, the FTC doesn't believe the sale does enough to preserve competition. The deal to acquire Rite Aid expires on Jan. 27, meaning Walgreens has just one week to satisfy regulators.

In the event that the deal fails to close by the deadline, Walgreens will be required to pay Rite Aid a termination fee of $325 million, or $650 million if certain conditions are met. If the deal does go through, the combined company will be the largest pharmacy chain in the United States.

Now what

It's unclear whether the FTC will complete its review by the deadline, although one of Bloomberg's sources believes it's unlikely. It's also unclear whether missing the deal will lead Walgreens to abandon the effort. Shares of Rite Aid have rallied since early November on optimism that the deal would go through, but it now seems that investors may have gotten it wrong.