It looks as if Walgreen Boots Alliance (NASDAQ: WBA) efforts to acquire the third largest U.S. drugstore operator; Rite Aid (NYSE: RAD) might fail. The U.S. Federal Trade Commission (NASDAQ:FTC) is doing everything its' power to kill the deal, The New York Post reported.
This brings us to the obvious question: who else would buy Rite Aid? There is actually a long list of potential suitors because of Rite Aid's 4,533 locations and $32.85 billion in revenues.
Some potential purchasers for Rite Aid include:
· Kroger (NYSE: KR) - America's largest standalone grocer already operates 2,244 pharmacies and revenues in the grocery business are stagnant. One potential use Kroger would have for Rite Aid stores would is as smaller neighborhood markets and cafes - to counter Aldi's push into U.S markets. Another is as a pickup point for online grocery orders.
· Amazon (NASDAQ: AMZN) - The online retail giant is trying to reduce its delivery costs. Rite Aid stores would make perfect pickup points for merchandise ordered online and as base points for same delivery services. Buying Rite Aid might also give Amazon an entry point into the highly lucrative prescription drug business.
· Cerberus Capital Management - The equity giant owns the second largest standalone grocer Safeway which is a major pharmacy operator.
· Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR). Buying Rite Aid would give these fast-growing chains more locations and a presence in the pharmacy business. It might also get them into more lucrative urban markets.
· Aldi - The German discount grocer is spreading fast. Owning Rite Aid would give it more locations; and pharmacies to counter Kroger and Walmart. Buying Rite Aid might help Aldi enter new states like Colorado.
· Lidl - Aldi's arch rival plans to enter the U.S. market this summer, Supermarket News reported. Purchasing Rite Aid would give it a readymade U.S. footprint of 4,553 stores and all that pharmacy revenue.
· Fred's (NASDAQ: FRED) - This smaller regional drugstore operator is in very sorry shape; it reported a "net income" of -$66.53 million on January 31, 2017. Fred's was trying to buy 1,200 Rite Aids to help Walgreens comply with the FTC. If the Walgreens' bid falls through Fred's might try to buy all of Rite Aid; perhaps with the aid of a private equity firm like Cerberus.
· Berkshire Hathaway (NYSE: BRK.B) - This is sort of a dark horse because Warren Buffett is down on retail right now. Yet we all know that Uncle Warren loves a bargain. If Berkshire Hathaway (NYSE: BRK.A) bought Rite Aid it would get $32.85 billion in revenues and 4,553 drugstores for around $4 billion. Rite Aid might also fit in well with some other Berkshire businesses including International Dairy Queen, Kraft Heinz, See's Candies, Borsheims Fine Jewelry, Ben Bridge Jewelers and the distributor the McLane Company.
Rite Aid is not going to disappear any time soon despite its problems. No matter what happens at the FTC Rite Aid will probably survive as part of a larger company; because its revenue is too valuable to disappear.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.