The clock ran out again on Friday for the merger agreement between Walgreens Boots Alliance (WBA -0.87%) and Rite Aid (RAD). The two large pharmacy retailers initially announced a proposed merger on Oct. 27, 2015, with the intention of closing the deal within 12 months. When it became apparent that the U.S. government would take longer to compete its antitrust review, the date was extended to Jan. 27, 2017. Now that date has come and gone, what happens next for Walgreens and Rite Aid?

Question mark in the middle of a road.

Image source: Getty Images.

Extending the extension

As expected, Walgreens and Rite Aid took the easiest path in light of the still-going Federal Trade Commission (FTC) review of the proposed deal. The companies announced another extension of the merger agreement before the market opened on Monday. Now, the end date of the agreement is July 31, 2017.

This extension brought some unwelcome news for Rite Aid shareholders, however. Originally, Walgreens offered to buy Rite Aid for $9 per share. The amendment to the agreement that extends the end date lowers the offer price to a maximum of $7 per share and a minimum of $6.50 per share. 

There is a range for the new offer price because the actual price paid will depend on how many Rite Aid stores Walgreens is required to sell. Walgreens initially planned to sell up to 1,000 stores. The company has increased the number of stores it's willing to sell to 1,200.

If the FTC requires Walgreens to sell 1,000 stores or fewer, the company will pay Rite Aid shareholders $7 per share. If Walgreens is required to sell the full 1,200 stores, Rite Aid shareholders will only receive $6.50 per share. If the actual number of stores sold falls in between those numbers, the price per share paid will be pro-rated.

Winners and losers

Monday's announcement resulted in clear winners and losers. Rite Aid was definitely the biggest loser. The pharmacy chain's stock tanked on the news, opening around 17% lower than the previous close.

The Rite Aid stock plunge could have been worse. The maximum share price with Walgreen's revised offer is 22% lower than its previous offer. The minimum share price offer reflects a decrease of nearly 28% from the initial offer.

Walgreens emerged as a winner. The big pharmacy services company's stock traded slightly higher after the market opened. While Walgreens might have to give up more stores to get Rite Aid, it will pay a significantly lower price should the transaction win regulatory approval.

Probably the biggest winner of all, though, was Fred's (FRED). Fred's stock jumped 6% in early trading following the announcement of the new details of the merger agreement. On Dec. 20, 2016, Walgreens and Rite Aid announced plans to sell 865 Rite Aid stores to Fred's to help convince the FTC to give a green light for the deal.

Reading the fine print of the initial agreement with Fred's explains why the company's stock rose after the announcement by Walgreens and Rite Aid. That agreement says that if the FTC requires Walgreens to sell more than 865 Rite Aid stores, Fred's will purchase the additional stores. Fred's was already on track to become the third-largest pharmacy chain in the U.S. under the original terms. Now, it appears the company could grow even larger than it initially expected.

But what will the FTC do?

The $7 billion question now is: Will the FTC allow the deal to go through? At this point, that question remains unanswered.

My hunch is that the transaction will win approval. Walgreens' proposal to sell up to 1,200 stores should make it easier for regulators to decide in favor of the merger. Also, President Donald Trump will be able to nominate three new commissioners for the five-member agency. It seems likely that he'll put forward individuals who aren't proponents of heavy government regulation, which could help make an approval of the Walgreens-Rite Aid deal more likely.

How quickly the decision will be made is another question. I suspect that Walgreens and Rite Aid shareholders will know the fate of the merger prior to the new July 31 agreement end date. If not, anything could happen -- including the deal falling apart altogether.