Investors in Rite Aid (NYSE: RAD) are off to a rough start for the year. Shares of the retail pharmacy chain fell more than 31% during the month of January, according to data from S&P Global Market Intelligence.
Rite Aid's shares started their descent after Bloomberg reported that Walgreens Boots Alliance (NASDAQ: WBA) wasn't making progress at satisfying the Federal Trade Commission's antitrust concerns regarding the acquisition. That's a big problem as the agreement between the two companies was set to expire on Jan. 27.
Bloomberg's report proved to be accurate as Rite Aid and Walgreens announced just a few weeks later that they would be extending the deadline of the acquisition until the end of July. However, Walgreens managed to negotiate a price discount on the deal. Previously, Walgreens agreed to buy Rite Aid for $9 per share. The updated agreement calls for "a maximum of $7.00 per share and a minimum of $6.50 per share."
The new deal also requires Walgreens to divest up to 1,200 Rite Aid stores in order to satisfy regulators' demands.
Given the increased uncertainty surrounding the deal and the news of a lower price, it's no surprise to see that shares took a nosedive during the month.
It's been more than a year since Walgreens announced its intentions to acquire Rite Aid, so there's no doubt that the patience of some shareholders is wearing thin. The big question on investors' minds right now is what happens if the FTC blocks the transaction altogether? That would likely be bad news for Rite Aid as it is currently servicing a massive amount of debt that would likely hinder its ability to compete in the marketplace.
Rite Aid's stock is currently trading at a sharp discount to Walgreens' updated offering price, which hints that the market still isn't convinced that this deal will go through. We should know more in the coming months, but since I have no interest in owning Rite Aid should this deal fall through, I'll be steering clear of this stock.