Acquisitions

Acquisition of certain Rite Aid Corporation (“Rite Aid”) assets

On September 19, 2017, the Company announced that it had secured regulatory clearance for an amended and restated asset purchase agreement to purchase 1,932 stores, three distribution centers and related inventory from Rite Aid for $4.375 billion in cash and other consideration. The purchases of these stores have been accounted for as business combinations and occurred in waves during fiscal 2018. The Company purchased 1,932 stores for total cash consideration of $4.2 billion for the fiscal year ended August 31, 2018.

As of November 30, 2018, the Company had not completed the analysis to assign fair values for certain intangible assets acquired and liabilities assumed for the acquired stores, and therefore the purchase price allocation has not been finalized as the Company is awaiting additional information to complete its assessment. During the three months ended November 30, 2018, the Company recorded certain measurement period adjustments based on additional information primarily to other non-current liabilities, intangible assets and deferred income taxes, which did not have a material impact on goodwill. The following table summarizes the consideration for the preliminary amounts of identified assets acquired and liabilities assumed for purchase of 1,932 stores as of November 30, 2018.



Consideration	$	4,330

Identifiable assets acquired and liabilities assumed
Inventories	$	1,171
Property, plant and equipment	490
Intangible assets	2,039
Accrued expenses and other liabilities	(55		)
Deferred income taxes	293
Other non-current liabilities	(937		)
Total identifiable net assets	3,001
Goodwill	$	1,329

The preliminary identified definite-lived intangible assets were as follows:



Definite-lived intangible assets	Weighted-average useful life (in years)	Amount (in millions)
Customer relationships	12	$	1,800
Favorable lease interests	10	219
Trade names	2	20
Total		$	2,039

Consideration includes cash of $4,157 million and the fair value of the option granted to Rite Aid to become a member of the Company’s group purchasing organization, Walgreens Boots Alliance Development GmbH. The fair value for this option was determined using the income approach methodology. The fair value estimates are based on the market compensation for such services and appropriate discount rate, as relevant, that market participants would consider when estimating fair values.

The goodwill of $1,329 million arising from the business combinations primarily reflects the expected operational synergies and cost savings generated from the Store Optimization Program as well as the expected growth from new customers. See note 3, exit and disposal activities, for additional information. The goodwill was allocated to the Retail Pharmacy USA segment. Substantially all of the goodwill recognized is expected to be deductible for income tax purposes.

The fair value for customer relationships was determined using the multi-period excess earnings method, a form of the income approach. Real property fair values were determined using primarily the income approach and sales comparison approach. The fair value measurements of the intangible assets are based on significant inputs not observable in the market and thus represent Level 3 measurements. The fair value estimates for the intangible assets are based on projected discounted cash flows, historical and projected financial information and attrition rates, as relevant, that market participants would consider when estimating fair values.

Assuming stores acquired during the three months ended November 30, 2017 were purchased at the beginning of the comparable period presented, pro forma net earnings and sales of the Company would not be materially different from the comparable period results reported. The acquired stores did not have a material impact on net earnings or sales of the Company for the three months ended November 30, 2017.

The Company acquired the first distribution center and related inventory for cash consideration of $61 million during the three months ended November 30, 2018. The transition of the remaining two distribution centers and related inventory remains subject to closing conditions set forth in the amended and restated asset purchase agreement.