For almost a year it seemed like the merger between Rite Aid (RAD - Get Report) and Walgreens Boots Alliance (WBA - Get Report) would not receive approval by the Federal Trade Commission. The FTC is examining whether a newly combined entity would be too large. 

But now, the deal seems more likely to occur, largely because Walgreens has said it is willing to divest itself of a larger number of Rite Aid's stores than it had previously said it would -- more than a quarter of Rite Aid's current locations. A combined Walgreens-Rite Aid would also not be much larger than its next biggest competitor. All this could bode well for investors. 

Jim Cramer and the AAP team hold a position in Walgreens Boots Alliance for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells WBA? Learn more now.

If the merger goes through at the minimum price of $6.50 per share, Rite Aid investors could earn an 18% profit. This could also be an excellent opportunity for investors with limited capital to deploy stock options and profit from Rite Aid's upside at a reduced risk.

Rite Aid shares have spiraled 36% so far this year. The drop has followed an extension of the merger deadline to July 31 as the two companies work out how many Rite Aid stores Walgreens would have to potentially divest to please regulatory officials. How many stores Walgreens divests would affect the price that the company pays. 

If Walgreens only divests 1,000 stores the company's management said it would buy Rite Aid's shares at $7, but if it divests all 1,200, it will only pay $6.50 per share. Rite Aid has 4,600 stores nationwide, and the combined Walgreens-Rite Aid would have about 11,500 locations. 

Some Rite Aid observers have incorrectly viewed the share price drop as indication that the deal would not go through. Other observers of the chain drug store space have echoed anti-trust concerns that the FTC frequently raises regarding large M&A deals.

But consider: Post-merger, Walgreens would have 19% of U.S. pharmacies, not much more than CVS Health's (CVS - Get Report)  16% share.

Investors worried about risk might consider a January 2018 call option at the $6 strike price. This would allow investors to benefit from the upward movement of the stock without risking too much capital.

And if the deal proceeds, investors could end up with a piece of Walgreens which has strong growth prospects.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.