Walgreens Boots Alliance has agreed to buy U.S. retail drugstore chain Rite Aid in a US$17.2 billion deal that will merge the second and third largest drugstore chains in the U.S.

The transaction is expected to close in the second half of calendar 2016. Upon completion of the merger, Rite Aid will be a wholly owned subsidiary of Walgreens Boots Alliance, and is expected to initially operate under its existing brand name. Integration of stores and brand images will take place at a later stage.

Walgreens store in Las Vegas - courtesy of Walgreens Boots Alliance

This is another step in Walgreens Boots Alliance’s global development strategy,” said Walgreens Boots Alliance Executive Vice Chairman and CEO Stefano Pessina. “Our complementary retail pharmacy footprints in the U.S. will create an even better network, with more health and wellness solutions available in stores and online.

This acquisition takes place less than one year after the completion of the merger between Walgreens and Boots Alliance, in the context of an increased competition between drugstore and mass-market chains.

Walgreens staff members - courtesy of Walgreens Boots Alliance

According to Brian Owens, Director of Retail Insights at Kantar, “it’s clear this move is intended to blunt the accretive benefits of the recent CVS Health acquisition of Target’s 1,660 pharmacies and 80 clinics.