Rite Aid, Albertsons Terminate $24B Merger Amid Stockholder Pushback
CAMP HILL PA. AND BOISE, IDAHO — Rite Aid Corp. (NYSE: RAD) announced Wednesday it has called off its previously announced merger with Boise-based grocery chain Alberstons Cos.
The $24 billion deal, first announced in February, would have allowed Albertsons to go public. Under the terms of the transaction, Rite Aid shareholders would have held a 29 percent stake in the combined company.
The integrated company would have operated about 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C.
“While we believe in the merits of the combination with Albertsons, we have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a standalone company,” said John Standley, chairman and CEO of Rite Aid, in a prepared statement.
The merger has faced pushback from a number of stockholders and investors in the months leading up to a shareholder vote over the deal, which was originally scheduled for Thursday, Aug. 9, but has since been called off. In June, Highfields Capital Management, an investment management firm that holds approximately 47 million Rite Aid shares, said it would vote against the merger, claiming it did not offer compelling value to Rite Aid shareholders.
Last month, investor advisory firms Glass Lewis and Institutional Shareholders Services (ISS) also came out in opposition of the deal, urging investors to vote against Albertsons’ acquisition of the drug store chain.
Under the terms of the merger agreement, neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination of the deal.
“We will continue building momentum for key areas of our business like our Wellness store format, customer loyalty program and expanded pharmacy service offerings, as we also enhance our omni-channel [distribution] and own brand offerings to strengthen our competitive position and create long-term value for stockholders,” said Standley.
Rite Aid will hold its annual meeting of stockholders on Oct. 30.
Albertsons is one of the largest food and drug retailers in the United States, with stores across 35 states and the District of Columbia under 20 brands, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs, as well as meal-kit company Plated based in New York City.
Camp Hill-based Rite Aid is one of the nation’s leading drugstore chains with fiscal 2018 annual revenues of $21.5 billion. The company also owns EnvisionRxOptions, a multi-faceted healthcare and pharmacy benefit management (PBM) company supporting a membership base of more than 22 million members; RediClinic, a convenient care clinic operator with locations in Delaware, New Jersey, Pennsylvania, Texas and Washington; and Health Dialog, a provider of health management solutions including analytics, a multi-channel coaching platform and shared decision-making tools.
Rite Aid’s stock price closed at $1.74 per share on Wednesday, Aug. 8, down from $2.35 per share one year earlier. The company’s stock dropped from $1.74 to $1.52 per share this morning upon the news.
— Camren Skelton