Grocer Alberstons to buy part of Rite Aid

Alberstons Cos. owners of Shaw’s and Star Markets in the Boston area says it will buy Rite Aid Corp

Alberstons Cos. owners of Shaw’s and Star Markets in the Boston area says it will buy Rite Aid Corp

On a conference call Tuesday morning, Albertsons and Rite Aid executives suggested the pharmacy chain's PBM unit could help grow the new company's customer base.

The owner of Jewel-Osco and several other grocery store chains has agreed to a deal to buy the nation's third-largest drugstore chain, Rite Aid.

Albertsons announced it will acquire more than 2,500 Rite Aid stores for an undisclosed amount, creating a company with estimated revenues of $83 billion, according to a news release. The combination of Albertsons Companies' billion dollar own brands, including O Organics and Lucerne®, and its manufacturing and operating capabilities, with Rite Aid's own brands in health and wellness, including B4Y™ and Daylogic™, and its pharmacy expertise will allow the combined company to drive growth opportunities and efficiencies across its purchasing, marketing, manufacturing, and merchandising functions.

Retailers have been under growing pressure from online competitors like Amazon.com, and the corner drugstore has been no exception. Larger rival Walgreens had tried unsuccessfully to buy the chain, but the company scuttled that push past year after encountering regulatory resistance. The mandate had required consumers to purchase health care or pay a tax penalty.

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The deal is the latest in a wave of consolidation in the drug retailing sector, which is looking to cut costs amid weak reimbursement rates and lower generic drug prices. CVS Health said in December that it would merge with Aetna, the health insurer, in a $69 billion deal that could potentially reshape the way health care is delivered in the United States. That deal came together after a federal judge blocked Aetna's proposed merger with rival Humana past year.

It will have 4,892 stores in all, and 4,345 pharmacies. The companies settled on the smaller deal instead. It will do that by exchanging shares of Rite Aid Stock for Albertsons stock.

Institutions own 47.11% of Rite Aid Corporation (RAD)'s shares.

The combined company is expected to generate pre-tax earnings of about $3.7 billion within three years, they said.

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Current Rite Aid Chairman and CEO John Standley will become CEO of the new entity, and current Albertsons Cos.

As at the very top there will be executives from both firms on the management team, which will maintain joint headquarters in Boise, ID and Camp Hill, PA. Assuming the Rite Aid - Albertsons deal goes through, the company may achieve the synergies and savings it forecasts, but will still be a many-faceted - and in my view, unwieldy - wholesaler, food retailer, and pharmacist. If the deal is approved by shareholders and regulators and closes in the second half of 2018 as expected, the grocery chain - which has more than 2,300 stores in 35 states and the District of Columbia under the Albertsons, Safeway and other brands - would substantially expand its geographic footprint.

The acquisition appears to be another move in the re-invention of grocery stores and where they choose to invest. Total sales rose to $136.30 billion from $130.9 billion during the same quarter a year ago and surpassing the $133.66 billion analyst mean.

Amazon's competitors also are bulking up health care services, which can not be purchased online.Late previous year, Rite Aid rival CVS Health Corp. said it would buy the health insurer Aetna for $69 billion.

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