Could Albertsons' purchase of Rite Aid fall apart?
Albertsons' move to acquire Rite Aid is being challenged as shareholders of the drugstore chain push for a higher sale price, according to Forbes. If the deal is successful, Rite Aid shareholders will own 30% of the new company, and Albertsons will own 70%.
Rite Aid said last week in a filing that the merger is expected to close in the second half of the year, but the company has yet to schedule a shareholder vote. This has given some opposed to the transaction more time to fight it or push for a better deal.
The $24 billion tie-up between the two companies would bring Rite Aid pharmacies to Albertsons and give the drug store chain access to the grocer's Plated meal kits and popular private label brands.
The merger between the drug store chain and Albertsons, owner of the Shaw's, Safeway and Acme, was announced late February. It was expected to close in the second half of the year. While the deal was unanimously approved by boards at both companies, Rite Aid shareholders are now rallying to fight back against the agreement.
If the deal falls through, it could hurt Rite Aid and Albertsons as both companies have something to gain from the merger. Rite Aid’s shares have plunged after a merger with Walgreens Boost Alliance was scaled back to include the purchase of nearly two thousand stores.
Albertsons is banking on the merger to take the company public, otherwise its IPO will be put on hold again. The transaction would enable Albertsons to not only expand its healthcare division but also to broaden its private label brands into Rite Aid stores. Albertsons could also have a joint rewards program that could help it draw customers to both its drugstores and supermarkets. Sales of Albertsons’ store brand products at Rite Aid could improve sales and help the grocer increase the reach of its Own Brands portfolio.
Rite Aid’s largest shareholders have called for an independent investigation outlining several issues including giving shareholders a fair premium and retention bonuses of senior executives, according to Forbes. The root cause of pushback is because the pharmacy benefit manager, EnvisionRx, makes the retailer more valuable to Albertsons’. The system allows Albertsons’ healthcare sector to grow significantly — a path retailers, including Albertsons, are continuously looking to expand.
It's uncertain what Albertsons, which has multiple synergies it could glean from this merger, would do if this deal collapses. If Rite Aid shareholders can gain enough traction, they may be able to pressure Albertsons to sweeten its offer to close the deal.
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