The chances of a successful Walgreens Rite Aid merger is upwards of 90%. And yes, I did just recently conclude that holding a massive stake in Rite Aid Corporation (NYSE:RAD) was better than cash, due to the low probability of the merger being blocked. Finally, I did tell BNL Members that I would only buy Walgreens Boots Alliance (NASDAQ:WBA) after the completed Walgreens Rite Aid merger. Therefore, why did I sell 56,000 shares of RAD stock to close my position, and buy 1,500 shares of WBA stock just days ahead of an expected merger with 4% upside remaining?
It’s a good question, and quite frankly, I still think holding RAD stock is a great idea. But truth be told, I don’t trust the NY Post, and have questioned them at every step of the way through this merger. Remember, the NY Post was responsible for RAD stock collapse a few months back when they reported that Walgreens was having trouble divesting Rite Aid stores, and when they pointed to turmoil with the FTC. I have always concluded that with each passing quarter, Walgreens would start dropping hints if there were issues, and that never happened. Therefore, why trust the NY Post now? It does not make sense just because the news is favorable for Rite Aid stock owners.
With that said, I bought 10,000 shares of RAD stock back in December 2012 at $1.23. I’d argue that no one has called it better than myself, and over time I have bought, sold, and accumulated a larger stake on the volatility of this merger.
Therefore, I still think the merger will close as expected, but admittedly, this has been one of the largest merger arbitrage spreads I have ever seen. I was appalled as Walgreens successfully divested more than enough Rite Aid stores, only to watch RAD stock give back recent gains and nearly fall to $8/share. Given that owning WBA stock is the long-term goal from the Walgreens Rite Aid merger, I believed it was time to make a move and not risk any potential downside.