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Walgreens Boots Alliance Inc. agreed to acquire Rite Aid Corp. for about $9.4 billion in cash in a transaction to further expand the company’s role in the distribution of medications in the U.S.

The Rite Aid deal, announced Tuesday, would combine the second- and third-largest drugstore chains in the U.S., with a total of about 12,800 locations, helping Walgreens vault past market leader CVS Health Corp. The acquisition will add to Walgreens’ earnings beginning a full year after completion and will produce more than $1 billion in savings from cost overlaps, the companies said Tuesday in a statement. Including debt, the deal is valued at $17.2 billion, they said.

The company also reported fiscal fourth-quarter earnings that showed how it reaps cost savings from mergers. Walgreens said it has saved $799 million in fiscal 2015 after combining with Alliance Boots GmbH last year.

Rite Aid shares fell 8.1 percent to $7.97 at 9:55 a.m. in New York, below Walgreens’ offer of $9 a share, reflecting speculation that the transaction will face antitrust scrutiny.

Walgreens shares slumped 6.6 percent to $88.90. The deal creates financial savings but does little to change the drugstore chain’s strategic position in the rapidly evolving health-care industry, Barclays Plc analyst Meredith Adler said in a note Tuesday.

Walgreens also reported fiscal fourth-quarter earnings Wednesday that beat analysts’ estimates. Excluding one-time items, earnings were 88 cents a share, beating the 81-cent average of analysts’ estimates compiled by Bloomberg. Walgreens’ pharmacies filled 222 million prescriptions in the quarter, up 4.6 percent from a year before.

Profit margins fell from the prior quarter in the U.S. retail pharmacy business, and same-store retail sales growth from a year earlier slowed to 0.4 percent.

Store Makeovers

Walgreens will revamp Rite Aid’s stores to focus on health, wellness and beauty, just as it has been remaking its own stores since the Alliance Boots deal, the company said. Rite Aid’s stores are older and less modern, though the company had already been working to revitalize them, said Jonathan Palmer, an analyst at Bloomberg Intelligence. Rite Aid will continue to operate under its own brand at first, though eventually the plan is to integrate the two chains.

Walgreens stores reaped an average $2.4 million in revenue in the three months that ended in August, compared with $1.5 million for Rite Aid.

Rite Aid’s stock had fallen 29 percent since Sept. 16, after the company lowered profit and revenue forecasts for the year, giving Walgreens a potential opportunity to make an offer. The price represents a 48 percent premium to Rite Aid’s closing price on Monday.

Speculation that Walgreens would pursue Rite Aid rose to a crescendo in March after billionaire Stefano Pessina, who took the reins as chief executive officer last January after becoming Walgreens’ largest shareholder when it combined operations with his Alliance Boots chain in the U.K. and Europe.

Pharmacy Benefits

In addition to expanding its drugstore locations, the Rite Aid deal gives Walgreens its first foray into the business of managing drug benefits for insurers and employers, an area where rival CVS is a leader. Rite Aid entered that business by acquiring Envision Pharmaceutical Services Inc. for about $2 billion this year.

If Walgreens aims to get bigger in drug-benefit management, it could use EnvisionRX to acquire other small competitors to build that business, said Ross Muken, an analyst at Evercore ISI who advises holding the shares.

Rite Aid CEO John Standley is eligible to receive $23.4 million if he’s terminated after the deal, according to data compiled by Bloomberg based on Walgreens’ offer price per share.

Shares of drug distributor McKesson Corp. dropped less than 1 percent, as did AmerisourceBergen Corp., Walgreens’ distribution partner for medications. Rite Aid represents about $18 billion of McKesson’s revenue, according to Evercore ISI. Walgreens hasn’t made a decision on what to do with McKesson’s Rite Aid contract, Pessina said Wednesday on a conference call.

CVS’s Moves

While Pessina had made clear his appetite for deals, he had been cagey about what kind of acquisition he might pursue. He has said only that the company wanted to participate in what he saw as the inevitable consolidation of the long distribution chain that delivers drugs from manufacturers to patients in the U.S.

While Pessina prowled for a deal, CVS stayed busy. In May, Walgreens’ top rival agreed to purchase nursing-home pharmacy Omnicare Inc. for $12.7 billion, expanding services to the country’s elderly. Less than four weeks later, CVS struck a deal to acquire Target Corp.’s pharmacies and clinics for $1.9 billion, putting its brand, which includes OneMinute Clinics, in retail locations across 47 states.

"Their biggest competitor in the U.S. has been getting bigger," said Palmer of Bloomberg Intelligence.

Walgreens already has a foothold in the drug-distribution business after it signed a 10-year agreement with AmerisourceBergen in 2013 and became the company’s third-largest shareholder.

Today’s Walgreens was built by acquisition. Pessina developed Bern, Switzerland-based Alliance Boots into a powerhouse through more than three decades of mergers before selling it to Walgreen Co. last year. He’s now the company’s largest shareholder with a 13 percent stake.

Walgreens plans to finance the deal with cash and new debt, it said. UBS AG was Walgreens’ financial adviser, with Simpson Thacher & Bartlett LP and Weil, Gotshal & Manges LLP providing legal advice. Citigroup Inc. gave financial advice to Rite Aid, with legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP and Jones Day.

— With assistance by Cynthia Koons, Anders Melin, and Melissa Mittelman

(Updates trading in fourth paragraph.)