Just three weeks before it was set to go to trial, Walgreens Boots Alliance (WBA) has agreed to pay $192.5 million to settle a class-action lawsuit brought by investors who claim they were misled by the company about the likelihood of a successful 2015 merger with Rite Aid, multiple sources report.
In late 2015, WBA agreed to acquire Rite Aid and its 4,600 U.S. stores, with the deal expected to close in late 2016. However, after 15 months of negotiations and a number of regulatory hiccups, WBA abandoned the original deal in June 2017 when it was blocked by the FTC for antitrust concerns. Eventually, WBA ended up buying just over 2,000 Rite Aid stores, 600 of which it subsequently closed.
The shareholder lawsuit alleged that WBA made false claims about how likely it was that regulators would approve the acquisition, causing shares of Rite Aid to skyrocket and leading to billions of dollars of investor losses when the deal eventually fell through. WBA declined to comment on the lawsuit or settlement.
The settlement comes amid a moment of upheaval at WBA and in the broader world of pharmacy retail. Following the abrupt September departure of WBA CEO Rosalind Brewer, the company named former Express Scripts CEO and Cigna executive Tim Wentworth to the top role. He will take the helm on Oct. 23.
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At the same time, Rite Aid named a new CEO of its own while simultaneously filing for bankruptcy on Oct. 16 to deal with its massive debt load, which was compounded by the $3.3 billion the company has agreed to pay in relation to its part in the sale of opioids. Litigation around the sale of opioids has hit the U.S. pharmacy sector hard. While Rite Aid is the first, and so far only, pharmacy chain to file for bankruptcy, the nearly $10 billion in combined settlements that Walgreens and CVS incurred for similar suits are weighing heavily on those two companies’ businesses as well.
As he takes over leadership of WBA, new CEO Wentworth will be focused on right-sizing the business, which has lately faced a prolonged period of lagging profits and dropping share prices.
