Acquisitions

12 Months Ended

Aug. 31, 2020

Acquisition of certain Rite Aid assets

During the fiscal year ended August 31, 2020, pursuant to the amended and restated asset purchase agreement entered into with Rite Aid Corporation ("Rite Aid") in September 2017, the Company acquired the remaining two of three distribution centers including related inventory for cash consideration of $91 million. The Company acquired the other distribution center and related inventory from Rite Aid for cash consideration of $61 million in fiscal 2019.

During the fiscal year ended August 31, 2018, the Company purchased 1,932 stores for total cash consideration of $4.2 billion. The purchases of these stores were accounted for as business combinations and occurred in waves during fiscal 2018. As of May 31, 2019, the Company completed the analysis to assign fair values for assets acquired and liabilities assumed for the acquired stores. During the fiscal year ended August 31, 2019, 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 paid and the amounts of identified assets acquired and liabilities assumed for purchase of 1,932 stores as of the fiscal year ended August 31, 2019.


	August 31, 2019
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	291
Other non-current liabilities	(937)
Total identifiable net assets	$	2,999
Goodwill	$	1,331

The 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 included 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 were based on the market compensation for such services and appropriate discount rate, as relevant, that market participants would consider when estimating fair values. During fiscal 2019, this option was terminated resulting in recognition of a gain in other income (expense).

The goodwill of $1,331 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.

The following table presents supplemental unaudited pro forma consolidated sales for the fiscal year ended 2018 as if all 1,932 stores were acquired on September 1, 2016. Pro forma net earnings of the Company, assuming these purchases had occurred at the beginning of each period presented, would not be materially different from the results reported. See note 3, exit and disposal activities, for additional information. The unaudited pro forma information has been prepared for comparative purposes only and is not intended to be indicative of what the Company’s results would have been had the purchases occurred at the beginning of the periods presented or results which may occur in the future.


(in millions)	2018¹
Sales	$	135,503

¹Impacted by store closures due to the Store Optimization Program.

Actual sales from acquired Rite Aid stores for the fiscal year ended 2018 included in the Consolidated Statement of Earnings are as follows:


(in millions)	2018
Sales	$	5,112

The 1,932 Rite Aid stores acquired did not have a material impact on net earnings of the Company for the fiscal year ended 2018.

Other acquisitions

The Company acquired certain prescription files and related pharmacy inventory primarily in Retail Pharmacy USA for the aggregate purchase price of $258 million and $304 million during the fiscal year ended 2020 and 2019, respectively.