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Fred’s Inc. Shares Soar Over 80% on Walgreens Deal

Shares of Fred’s Inc. were on fire after Wall Street learned that the company had struck a deal with pharmacy giant Walgreens.

Fred’s Inc., along with its subsidiaries, operate in 15 states in the southeastern United States with 304 full-service pharmacy departments located within Fred’s stores, including four franchised locations.

The stock saw a gain of over 80% after the company announced a $165 million deal to sell some pharmacy files to Walgreens. Walgreens will buy the files and related pharmacy inventory of 185 Fred’s stores across 10 states in the Southeast.

The transaction is subject to adjustment, plus an amount equal to the value of related pharmacy inventory. After the deal is complete, Fred’s will continue to operate about 162 pharmacies across nearly 600 stores.

Fred’s pharmacy staff at the closing locations will have an opportunity to apply for any available positions at Walgreens as well. Fred’s patients will receive letters notifying them of the transfer.

“With this agreement, we have taken a major step towards achieving one of our main goals of eliminating our debt balance,” said Fred’s interim CEO and CFO Joe Anto.

Fred’s had previously announced a plan to unlock shareholder value by monetizing non-core assets through strategic transactions.

“This agreement increases patient access to Walgreens pharmacies in the Southeastern U.S., and allows us to introduce more people to Walgreens trusted pharmacy services in these communities. We look forward to welcoming Fred’s patients and team members who are hired into available Walgreens positions,” remarked Richard Ashworth, Walgreens President of Operations.

According to Walgreens’ press release, PJ SOLOMON is acting as financial advisor and Akin Gump Strauss Hauer & Feld LLP is acting as legal advisor to Fred’s. Sidley Austin LLP and Weil Gotshal & Manges LLP are acting as legal advisors to Walgreens.

The file transfers are expected to begin in the fourth quarter this year and be completed in the first quarter of next year, the companies said.

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