Integrated Platform Will Develop an Openly Traded Grocery/Pharmacy Chain of 4,900 Locations
Albertsons Cos., one of the country’s largest grocery merchants, and drugstore chain Rite Help Corp. (NYSE: RAD) announced a conclusive merger agreement under which privately held Albertsons will acquire publicly traded Rite Help.
The combined business will operate about 4,900 shops, including 4,350 drug store locations across 38 states, with Albertsons pharmacies being converted to Rite Aid.
The offer follows Rite-Aid’s partly stopped working full merger with Walgreens Boots Alliance Inc. (NASDAQ: WBA). The offer ended up being pared down last September after failing to protect regulative approval with Rite-Aid eventually agreeing to sell 1,932 locations to Walgreens. Those sales are expected to be completed this spring.
The brand-new proposal will utilize expanded Albertsons West Coast grocery existence with Rite-Aid’s Northeast drug store presence. The merged companies will be able to offer a complete suite of health and health abilities, including specialized pharmacy offerings and in-store RediClinics in bigger Albertsons stores and stand-alone Rite Help stores.
Under the terms of the agreement, Rite Help shareholders will deserve to choose to receive either stock or a combination of stock and cash. Depending on the results of cash elections, investors of Rite Aid will own a 28% to 29.6% stake in the combined company, and current Albertsons investors will own the remainder.
Albertsons is backed by an investment consortium led by Cerberus Capital Management, which also consists of Kimco Real estate Corp. (NYSE: KIM), Klaff Realty LP, Lubert-Adler Partners, and Schottenstein Stores Corp.
. Present Rite Aid chairman and CEO John Standley will end up being CEO of the combined business, with existing Albertsons chairman and CEO Bob Miller serving as chairman.
The name of the combined company will be determined by transaction close however will continue to have head office in both Boise, ID, and Camp Hill, PA.
“This powerful combination allows us to end up being a really separated leader in providing worth, option, and versatility to meet customers’ progressing food, health, and wellness requirements,” Standley said. “The combined platform positions Rite Aid to capitalize on our drug store knowledge and broaden and boost our pharmacy footprint. We are confident that providing enhanced consumer experiences and worth will drive development and profitability while developing compelling long-lasting value for investors.”
The combined organisation is expected to produce earnings of approximately $83 billion in its first year of operation. The combined business expects to provide yearly cost synergies of $375 million in approximately three years, with a majority of the expense savings anticipated to be realized within the very first two years post-close.
The transaction has actually been authorized unanimously by the boards of directors of both business. The merger is anticipated to close early in the second half of this year, based on the approval of Rite Help’s investors, regulative approvals, and other traditional closing conditions.
The Albertsons-Rite Help tie-up continues a wave of consolidation sweeping through the retail and healthcare markets. Last year, CVS Health and Aetna consented to integrate in a $68 billion offer, while recent media reports have stated that Walgreens Boots Alliance has held initial conversations with pharmaceutical firm AmerisourceBergen.
The Cerberus consortium obtained Albertsons as part of a $3.3 billion deal with Supervalu in 2013 and later combined the business with Safeway, creating a grocery chain of 2,230 shops.
Albertsons had been reported to be preparing an initial public offering however put those plans on hold after Amazon acquired Whole Foods Market, inning accordance with media reports. The merger with Rite Aid makes it possible for Albertsons to prevent having to go through an IPO as Albertsons Companies’ shares are expected to trade on the New York Stock Exchange following the close of the deal and the share exchange.
Credit Suisse and Goldman Sachs & & Co. functioned as lead monetary advisors to Albertsons and Schulte Roth & & Zabel LLP functioned as legal advisor. Bank of America Merrill Lynch likewise served as financial consultant to Albertsons and is offering dedicated funding for the proposed deal together with Credit Suisse and Goldman Sachs.
Citi worked as exclusive monetary advisor to Rite Help, and Skadden, Arps, Slate, Meagher and Flom LLP functioned as legal advisor.