Home / News / Business News / Albertsons to buy drugstore chain Rite Aid

Albertsons to buy drugstore chain Rite Aid

The Albertsons headquarters east of downtown Boise.

The Albertsons headquarters east of downtown Boise. The privately held grocery company said it plans to buy Rite Aid, the nation’s third-largest drugstore chain with about 4,400 stores. File photo.

The privately held owner of Safeway, Vons and other grocery brands is plunging deeper into the pharmacy business with a deal to buy Rite Aid, the nation’s third-largest drugstore chain, to form a new company with $83 billion expected revenue.

Albertsons Companies is offering either a share of its stock and $1.83 in cash or slightly more than a share for every 10 shares of Rite Aid. A deal value was not disclosed in a statement released Feb. 20 by the companies.

Shares of Rite Aid, which have shed more than half their value over the past year, surged 26 cents, or 12.2 percent, in premarket trading after the deal was announced.

Shareholders of Boise, Idaho-based Albertsons will own more than 70 percent of the combined company, which is expected to trade on the New York Stock Exchange. The companies say the deal should close in the second half of this year, but regulators and Rite Aid shareholders still have to approve it.

Rite Aid Chairman and CEO John Standley will lead the combined company as CEO, while Albertsons leader Bob Miller will serve as chairman. The companies say they will keep headquarters in both Boise and Camp Hill, Pennsylvania, where Rite Aid is based.

The companies did not mention staffing changes at either location.

Albertsons Companies, which has 2,300 locations across the United States, will join Rite Aid’s 2,600 locations to form a new company, the name of which has not been announced. The new company will have 4,900 locations and an estimated 369,000 employees.

John Standley, the current CEO and chairman of Rite Aid, will become the new company’s CEO. Bob Miller, CEO of Albertsons, will become the new company’s chairman.

Both men were involved in efforts starting in late 1999 to restore Rite Aid after an accounting scandal under its former leadership nearly sank the company.

Standley joined Rite Aid in 1999 as CFO. He left the company in 2005 for a brief stint as CEO of Pathmark Stores between 2005 and 2007. He rejoined Rite Aid as president in 2008 and took the mantle as CEO in 2010.

Miller became CEO and chairman of Rite Aid in 1999 before accepting the position with Albertsons in 2006. He held the Rite Aid CEO job until 2003 and remained on the board until 2011. Before coming to Rite Aid, he was CEO of Fred Meyer, a grocery chain in the Northwest U.S.

Shareholders of Rite Aid will own up to 29.6 percent of the new company while shareholders of Albertsons will own up to 72.6 percent of the new company. Albertson, one of the largest private companies in the nation, has repeatedly sought an IPO but has been stalled by various industry developments, including the purchase of grocery chain Whole Foods by Amazon last year.

Known as a “reverse takeover,” the merger of Rite Aid and Albertsons allows the latter to skip the IPO process. The new company is expected to trade on the New York Stock Exchange.

Albertsons is backed in the deal by Cerberus Capital Management, a private equity firm based in New York City.

The deal between Albertsons and Rite Aid comes as the latter is finalizing the hand-off of over 1,900 stores to Walgreens Boots Alliance. That deal, valued at over $4.38 billion and signed last year, is a little over halfway done, with Walgreens now in possession of over 1,100 former Rite Aid locations. Walgreens is expected to close 600 of them.

Rite Aid, which employs 89,000 people, reported $5.4 billion in revenue in its fiscal third quarter, which ended Dec. 2 of last year. That’s down from $5.7 billion in revenue from the same quarter in 2016.

Albertsons Companies employs 280,000 people and, as a private company, does not reveal revenue figures.

This story was updated at 10:45 a.m. Feb. 20 with new information. The Associated Press also contributed to the story.


About BridgeTower Media Newswires