Rite Aid and Albertsons terminate merger

Irving Hamilton
August 9, 2018

Grocery giant Albertsons, meanwhile, issued a statement saying it disagreed with Rite Aid stockholders' concerns that the deal would undervalue the chain and that it had refused to change the terms of the deal.

The retailers announced late Wednesday that they are calling off the deal because of pushback from shareholders who complained it undervalued Rite Aid.

Shares of the drugstore chain plunged after markets opened Thursday.

Back in 2015, the idea of acquiring all of Rite Aid had piqued the interest of another player - Walgreens, the second-largest pharmacy store chain in the US after CVS Health.

In the weeks leading up to the deal, however, two prominent proxy advisers recommended that shareholders vote against it.

"We have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a standalone company", Rite Aid CEO John Standley said in a statement.

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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 merger agreement.

The company also announced its board of directors is evaluating governance changes at the company.

The collapse of the deal is the second time a deal has failed for Rite Aid, after its proposed merger with Walgreens Boots Alliance Inc. past year fell apart. The drugstore chain has struggled with high debt levels and tough competition, as narrowing drugstore networks have pushed customers away from its stores. "After the sell-off of stores to Walgreens, it lacks scale".

Earlier this week, Rite Aid said it was chopping its fiscal 2019 forecast because generic drug pricing wasn't shaping up how it expected in April, when it first laid out expectations. Last September, Walgreens Boots Alliance Inc. announced a slimmer agreement to buy almost 2,000 Rite Aid locations and some distribution centers for about $4.38 billion.

Last month, Institutional Shareholder Services Inc (ISS) had said that Rite Aid investors should vote down its $24 billion merger with Albertsons saying the agreement was not going to give the drug store chain's shareholders a "fair ownership interest" in the combined company.

However, the deal failed to gain regulatory approval, and instead Walgreens settled for buying part of Rite Aid-some 2,000 stores.

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