Rite Aid tumbles on fears for Walgreens deal

Rite Aid fell by the most in more than two years on Friday after a report said that US antitrust officials have raised concerns about Walgreens Boots Alliance’s proposed bid for its smaller rival.

Following discussions with Federal Trade Commission staff about the merger — valued at $17.2bn, including debt — Walgreens and Rite Aid had said last year that they had reached a deal to sell 865 Rite Aid stores to Fred’s Inc for $950m, pending regulatory approval, “in response to concerns identified by the FTC” during its review.

Walgreens said at the time that it was actively engaged in discussions with the FTC and aimed to close the deal in early 2017.

However, shares in Rite plunged by as much as 19.2 per cent to $6.95 after Bloomberg reported that the plan to win clearance for the deal “hasn’t satisfied officials” at the FTC, citing sources familiar with the matter. It recovered some ground, ending the day 13.3 per cent lower at $7.46.

The report said that officials “aren’t sold” on the plan to divest the stores to allay antitrust concerns. Walgreens shares gained 2.5 per cent to $86.39.

Elsewhere, General Electric saw its shares come under pressure after it kicked off the earnings season for US manufacturers with a mixed bag of results.

The stock fell by as much as 2.9 per cent — the most in four months — after the industrial conglomerate reported fourth quarter sales that trailed analysts estimates. The shares ended the day 2.2 per cent lower at $30.53.

Revenues were $33.1bn for the quarter, down 2 per cent and a little below the average forecast of $33.9bn as good performances from power generation equipment failed to offset the slump in its operations serving the oil and gas industry offset.

Underlying earnings per share were 46 cents for the fourth quarter of 2016, down 12 per cent from the equivalent period of 2015 but in line with the average of analysts’ expectations.

For the year as a whole, underlying earnings per share were $1.49, up 14 per cent from 2015 but towards the lower end of the range of guidance that GE gave last month.

GE is now the first US manufacturer to report in the earnings cycle, after Alcoa shifted to later in the month following its split from the specialised metals company Arconic.

After striking an upbeat note about the outlook for the US in his comments at the GE analysts’ day last month, Jeff Immelt, chief executive, did not expand on the theme in a statement accompanying the earnings.

He said the company “will continue to invest in the Industrial Internet to lead in productivity and performance for our customers in 2017”.

Shares in Schlumberger also came under pressure after the world’s largest oilfield services group reported a fourth quarter loss as persistently low crude prices continue to sap demand for its services.

The stock had dropped by as much as 1.9 per cent — the equivalent of about $2.2bn of its market value — before recovering to close the day 0.8 per cent lower at $86.49.

The wider market fared better however, with the three main stock indices trading firmly in positive territory as all eyes turned to inauguration day.

The Dow Jones Industrial Average snapped a five-day losing streak, climbing 0.5 per cent to 19,827.2. The S&P 500 gained 0.3 per cent to 2,271.3 while the Nasdaq Composite added 0.3 per cent to 5,555.3. Friday’s rally was broad-based with only industrials and healthcare on the S&P failing to notch up gains, while telecoms and materials were the day’s biggest winners, both climbing 0.9 per cent.