June 24, 2018

Albertsons Companies To Merge With Rite Aid

23 February 2018, 02:02 | Lionel James

Grocery store chain Albertsons, drugstore Rite Aid unveil tie-up

Rite Aid Corporation (NYSE:RAD) Jumps 23.47% Tuesday's Pre-market after Takeover News

Even before the consolation prize of a deal last summer that saw buy 2,200 Rite Aid stores instead of the entire chain, Rite Aid was languishing.

Miller told the Wall Street Journal on Tuesday the merger was a way for Albertsons and Rite Aid to stay competitive against large retailers such as Walmart and online giant Amazon. Analysts have placed a $2.07 price target on Rite Aid Corporation, suggesting a -2.82% decline from recent close. For every 10 shares of Rite Aid owned, shareholders can exchange for 1 share of Albertsons as well as $1.83 in cash. Late past year, CVS Health agreed to buy Aetna for $77 billion. Aetna and CVS say they'll be able to offer low-priced care through the chain's many locations, via apps and the phone, according to reports. Stay with us at Deli Market News! CVS and Walgreens struggled on that front too, but at least their pharmacy businesses are thriving.

It remains to be seen whether this combination of in-store space and online and mobile innovation will pay off for Albertsons, which still doesn't have the sheer reach of Amazon, despite its many locations. The grocery industry as a whole is worth $800 billion and the drug industry is worth about $450 billion in the US, according to Bloomberg.

Amazon is also seeking to upend the health care field. Without that source of revenue, health care premiums could become more expensive, according to experts. The new company will have 4,900 locations and an estimated 369,000 employees.

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A group of investors led by private equity firm Cerberus Capital Management for approximately $3 billion in 2006. Albertsons even has launched a digital platform created to give CPG brands access to shopper data to help them deliver targeted ad campaigns, showing that it is very serious about engaging consumers at all points of the shopper journey. Stand-alone Rite Aid stores will continue to operate with few, if any changes. It will do that by exchanging shares of Rite Aid Stock for Albertsons stock. Institutional investors and hedge funds own 51.68% of the company's stock. The Federal Trade Commission cleared the way in September for Walgreen, the nation's second largest drugstore chain, to purchase 1,932 Rite Aid Stores for $4.38 billion.

Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28.0 to 29.6 percent stake in the combined company, and current Albertsons Companies shareholders will own a 70.4 to 72.0 percent stake in the combined company on a fully diluted basis.

Albertsons also owns Safeway stores, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs, and the meal kit company Plated. Harbor Advisors LLC boosted its position in shares of Rite Aid by 300.0% during the third quarter.

Current Rite Aid Chairman and Chief Executive Officer John Standley will become chief executive officer of the combined company, the release states, and current Albertsons Companies Chairman and Chief Executive Officer Bob Miller will serve as chairman.

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