Grocery retailer Albertsons, owner of Acme, to buy drugstore chain Rite Aid

A debt-laden distant third behind Walgreens and in the prescriptions market, Rite Aid has a market share only one third that of either rivals, according to Pembroke Consulting. Rite Aid shareholders also have the option of receiving 1.079 shares of Albertsons stock for every 10 shares of Rite Aid stocks.

In what may seem to be strategic move in response to the rapidly changing dynamics of the consumer shopping landscape, the US supermarket operator Albertsons, recently announced that it would buy the drug store Rite Aid Corp, apparently to give itself more clout to compete against the big shots. "Taking care of customers and patients is a top priority". Advisor Group Inc. boosted its position in shares of Rite Aid by 49.8% during the second quarter.

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.

"This combination enables us to become a truly differentiated leader in delivering value, choice, and flexibility to meet customers' evolving food, health, and wellness needs", said Rite Aid Chairman and Chief Executive Officer John Standley in the release.

"The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint", he said.

According to a statement announcing the merger, Rite Aid shareholders can exchange ten shares of Rite Aid common stock for either one share of Albertsons common stock plus roughly $1.83 in cash or 1.079 shares of Albertsons stock. The combined company's revenue is projected to be around Dollars 83 billion.

A combined Albertsons and Rite Aid would have almost 5,000 USA stores and 4,300 pharmacies. It's not yet clear what the name of the new company will be.

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Rite Aid Co. has a 52-week low of $1.38 and a 52-week high of $6.15.

Chairman and CEO Bob Miller will serve as its chairman.

The transaction has been approved unanimously by the boards of directors of both companies. As per Thursday, October 29, the company rating was downgraded by Credit Suisse. Citi served as exclusive financial advisor to Rite Aid, while Skadden, Arps, Slate, Meagher and Flom LLP acted as legal advisor.

For Albertsons, the deal is yet another transformative purchase put together by its private equity parent Cerberus Capital Management.

"Most investors have probably written off this [Albertsons] investment but even the repayment of original principal would help KIM in its deleveraging efforts", Boenning & Scattergood analyst Floris van Dijkum told CNBC.

Immediately following completion of the merger, Albertsons will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis. The new company is expected to trade on the New York Stock Exchange.

Federal approval is still forthcoming, but if successful, the merger will create a company with over $82B in annual revenue and open the door for Albertsons to attempt an IPO again (they came close in 2015 but pulled the plug amidst "skittish" market conditions for retailers).

  • Ronnie Bowen