Rite Aid deals follows larger trend

Jon Howard
February 23, 2018

Before coming to Rite Aid, he was CEO of Fred Meyer, a grocery chain in the Northwest U.S. "I have long known the excellent management team at Rite Aid, and we share a singular focus on superior customer service and a clear vision and strategy to become the favorite local supermarket and pharmacy to shoppers in every neighborhood we serve".

Albertsons Companies executives said Tuesday (Feb. 20) that their purchase of Rite Aid's more than 2,500 remaining stores will help the combined company become a "leader in food, health and wellness". "Taking care of customers and patients is a top priority".

Many analysts are providing their Estimated Earnings analysis for Rite Aid Corporation and for the current quarter 5 analysts have projected that the stock could give an Average Earnings estimate of $-0.01/share.

Rite Aid, based in Camp Hill, Pa. with sales of $32.8 billion past year, has struggled with high debt levels and tough competition from CVS and Walgreen, as narrowing drugstore networks have pushed customers away from its stores.

Once the merger takes place, there will be almost 4,900 company locations, with 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C. "We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders". Finally, Leisure Capital Management acquired a new position in shares of Rite Aid during the third quarter worth $353,000. The remainder of Rite Aid's stores - around 2,000 locations - will be sold to Walgreens Boots Alliance under an agreement reached with federal regulators, which blocked a full merger of the two companies back in 2015.

According to the Albertsons Companies website, there are now no stores under their ownership in Schuylkill County, and the nearest such store to our area, a Safeway, is located in Wilmington, Delaware.

Following the merger, current Rite Aid Chairman and CEO John Standley will serve as CEO and Albertsons Chairman and CEO Bob Miller will serve as chairman of combined company. The name of the combined company will be determined by transaction close.

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The board of directors will be composed of nine directors: four from Albertsons, four from Rite Aid and one jointly selected director. Walgreens is expected to close 600 of them. This move showcases the company's leadership hailing from both companies, and taking it a step further, the new singular company will have headquarters in both Boise, Idaho, and Camp Hill, Pennsylvania.

Credit Suisse and Goldman Sachs & Co. And this deal will make Albertsons a stock exchange listed company once again, allowing Cerberus to start exiting its investment.

In 2006, a Cerberus-led investment group acquired 661 non-core Albertsons stores from Albertsons, Inc.

Immediately following completion of the merger, Albertsons will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis.

"Drug retailing has had its own challenges with reimbursement pressure and weak front-end sales as evidenced in Rite-Aid's weak profits over the last couple of years, and competing with much larger and more diversified drug retailers like CVS and Walgreens will be a formidable challenge", wrote Moody's vice president Mickey Chadha, in an email sent to Food Dive.

Rite Aid shares were up 7% at 2.28 in morning trade on the stock market today.

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