Stock Futures Mixed as Walgreens, Rite Aid Strike a New Deal

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Stock futures were mixed on Thursday, June 29, after Walgreens Boots Alliance Inc. (WBA) and Rite Aid Corp. (RAD) called off a merger agreement but struck a new deal. 

S&P 500 futures were up 0.12%, Dow Jones Industrial Average futures climbed 0.08%, and Nasdaq futures declined 0.14%.

As part of the new deal, Walgreens will pay $5.175 billion to Rite Aid in cash and receive 2,186 stores in return. Walgreens will also pay Rite Aid a $325 million termination fee for the cancelation of the deal.

Walgreens will be an even bigger drug-selling beast, with more than 15,000 stores spanning 11 countries. Walgreens expects synergies of $400 million from the deal and for the new stores to increase its adjusted earnings within the first year of the deal’s closing. As for Rite Aid, it will be left with about 2,300 stores once the deal closes in six months.

Walgreens Boots Alliance is a holding in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells WBA? Learn more now.

The original merger agreement struck in 2015 was called off. The deal had been under intense scrutiny from antitrust regulators and doubts swirled that the agreement would gain approval. The original deal was first announced in October 2015 with amended conditions in Janunary 2017.

Fred’s Inc.  (FRED) stock crashed more than 25% in premarket trading as it will be shut out of buying 865 stores the combined company planned to divest.

Separately, Walgreens topped earnings and sales estimates over its fiscal second quarter. The pharmaceutical chain earned an adjusted $1.33 a share, 3 cents higher than consensus. Sales of $30.1 billion exceeded estimates of $29.7 billion. The company now anticipates full-year earnings guidance of $4.98 to $5.08 a share, increasing the lower-end of guidance from $4.90. 

Crude oil prices extended gains achieved on Wednesday, June 28. West Texas Intermediate had surged 1.1% a day earlier even after an increase in domestic stockpiles. The Energy Information Administration reported a 100,000-barrel build in crude oil inventories over the past week, while gasoline and distillate stockpiles fell.

Crude has been under pressure lately on worries over global oversupply and stubbornly high production. Crude reached its lowest level in 10 months on Wednesday, June 21.

West Texas Intermediate crude was up 1% to $45.19 a barrel on Thursday.

On the economic calendar, the final print on first-quarter GDP growth on Thursday, and weekly jobless claims will be released at 8:30 a.m. ET.  

Earnings of note include HB Fuller Co. (FUL) , Pier Imports Inc. (PIR) , Worthington Industries Inc. (WOR) , McCormick & Co. Inc. (MKC) , Lindsay Corp. (LNN) , Constellation Brands Inc. (STZ) , Acuity Brands Inc. (AYI) , ConAgra Brands Inc. (CAG)  and Greenbrier Cos.  (GBX) . 

Office supply company Staples Inc. (SPLS) agreed to be acquired by private-equity firm Sycamore Partners for $10.25 a share, or $6.9 billion. The sale comes a year after a federal judge, citing antitrust concerns, blocked Staples’ proposed $6.3 billion merger with rival Office Depot Inc. (ODP) . The deal is expected to close by the end of the year.

It’s the final week of the second quarter and benchmark indexes are expected to post solid gains. Strong fundamentals and a positive earnings season have given markets a boost over the past three months even as volatility held at multi-year lows.

The Dow is on track to end nearly 4% higher for the quarter, adding to the 4.5% growth seen in the first quarter. Likewise, the S&P 500 is on track to end with gains of roughly 3%, slowing from the 5.5% increase seen in the first three months of the year.

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