Merger Of Walgreens

Companies are required to disclose subsequent events since most of these events are significant. Companies usually wait until the period ends to finalize important non-operating transactions. This insures having the most recent updates on a company financial status after the fiscal year end and before the issuance of the financial reports. In fact, companies use this period to evaluate their new deals and make the decision on them.

I found the merger between the second and the third largest drug retailers in the US to be a good example of this. Walgreen and Rite Aid announced that they will merge to form the largest drug retail store in the US, topping CVS Health. The agreement was signed on October 27, 2015, after Walgreens fiscal year end on August 31, 2015, and disclosed in the financial statements of 2015. Walgreens announced that they are planning to finance the acquisition with a combination of debt and equity totaling to $17.2 billion. The acquisition will be closed late this year, according to Walgreens (Walgreens 10K, 2015).
Both Walgreens and CVS stock prices jumped after the announcement and the attention was drawn from the actual performance of the two companies in the last year. However, it’s important to mention that this industry has been struggling to reduce operation’s costs by mergers, hoping to gain leverage and pressure drug manufacturers to keep prices down (Wattles,