Albertsons, Rite Aid deal creates U.S. supermarket and health care giant

Albertsons, Rite Aid deal creates U.S. supermarket and health care giant”

The latest deal, announced Tuesday (Feb. 20), means Albertsons is acquiring 2,500 Rite Aid stores not involved in the Walgreens deal. The integrated company will operate approximately 4,900 locations and 4,350 pharmacies in 38 states and Washington, D.C. If RAD shareholders are receiving at least 28% of a $24 billion company, that amounts to about $6.72 billion.

Experts speculate this deal to work in favor of the Albertsons, as it would enhance its store ability to better serve the pharmacy customers - one of the deal's many potential benefits.

The drug store operator, Rite Aid Corp and Albertsons together are valued at around $24 billion, including the debt, and this acquisition would accelerate the remaking of the US retail and health-care industries.

The nation's largest drugstore chain, Walgreens, tried unsuccessfully to buy all of Rite Aid past year but scuttled that deal after encountering regulatory resistance. The market value of Rite Aid is approximately $2.3 billion and is now selling a large chunk of its locations to Walgreens. Walgreens initially proposed buying all of Rite Aid, but was blocked by regulators.

Once sales to Walgreen are completed, Rite Aid would have 44 stores left in Maryland, which subsequently would be acquired by Albertsons. Most Albertsons company pharmacies will be rebranded with the Rite Aid name.

Moody's Vice President Mickey Chadha said the deal would give the new entity the large scale and diversified revenue base needed in the highly competitive USA food and drug retail environment.

"I think that the customer experience needs to be a bit more than just, "Oh, I just go to the pharmacy", or 'Oh, I just go to the grocery store, '" said David Grasso, business editor at Bold Media. Amazon made a push into the food business by buying the upscale grocery chain Whole Foods for $13.4 billion a year ago. But it said the combined company would bring in about $83 billion in annual revenue.

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The deal includes the more than three dozen Rite Aid stores across the Buffalo Niagara region.

For perhaps the second time in his long career, Bob Miller may be a white knight for Rite Aid shareholders. But it also gets it deeper into the increasingly tough and competitive pharmacy business. CVS previously announced plans to buy the health insurer Aetna and Walgreens is in talks to buy drug distributor AmerisourceBergen Corp., in addition to moving forward with the scaled back Rite Aid deal, the Journal said.

Under the terms of the agreement, in exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either one share of Albertsons Cos. common stock plus approximately $1.83 in cash, or 1.079 shares of Albertsons Cos. stock.

Under the Albertsons deal, Rite Aid will continue to operate standalone pharmacies. Shareholders of Boise, Idaho-based Albertsons, which is now privately held, will own more than 70 percent of the combined company. Leadership from both companies will run the company, which will be dually headquartered in Boise, Idaho and Camp Hill, Pennsylvania.

Rite Aid shares closed up 3.3 percent on the news.

The Associated Press contributed to this article.

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