Fred's Pharmacy said it signed an agreement with Walgreens and Rite Aid to purchase stores and certain assets related to store operations for $950 million in cash. If approved, Fred's Pharmacy would become the third-largest drugstore chain in the U.S.
Walgreens shares were slightly higher.
"We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members," Fred's Pharmacy CEO Michael Bloom said in a statement.
Fred's Pharmacy and its subsidiaries operate over 600 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the U.S.
The agreement comes as Rite Aid is in the process of being acquired by Walgreens, which is subject to approval by the Federal Trade Commission. In October, the companies reached a decision to delay their merger agreement until next year.
The transaction with Fred's Pharmacy is expected to take place several months after Walgreens proposed acquisition of Rite Aid is completed, subject to approvals and closing conditions.
Rite Aid's stock is up 9 percent year-to-date.