Is the Albertsons-Rite Aid deal in trouble?

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Is the Albertsons-Rite Aid deal in trouble?

By Gina Acosta - 06/22/2018

It looks like the proposed merger between Albertsons and Rite Aid will come down to a special meeting of stockholders.

Rite Aid announced that shareholders will vote at 8:30 a.m. on Aug. 9 to consider a proposal to approve the previously announced agreement and plan of merger with Albertsons Companies, Inc.

The vote comes as some investors are rallying support for what they hope will be a better deal, or to stop the merger altogether. Chris Komatinsky, an individual shareholder from Los Angeles with about 1.5 million Rite Aid shares, has told the media that he and several other shareholders want the merger stopped.

For its part, Rite Aid says a merger with Albertsons will create a differentiated health and wellness brand strategy that will drive sustained sales growth in the U.S. 

In a fourth quarter earnings call with analysts in April, Rite Aid Chairman and CEO John Standley said the retailer has more opportunities to grow services within Albertsons stores as well as open some freestanding stores. 

"During the fourth quarter, we made significant progress in a number of areas: our Retail Pharmacy Segment delivered strong results with an increase in Adjusted EBITDA over the prior year; our Pharmacy Services Segment is off to a strong start in the new commercial selling season; shortly after the quarter ended, we completed the asset sale of 1,932 stores to WBA; and we entered into a definitive merger agreement with Albertsons Companies to transform Rite Aid into a truly differentiated leader in food, health and wellness," said Rite Aid Chairman and CEO John Standley.

Rite Aid has said it will continue to convert its standalone pharmacies to “wellness stores,” which have expanded clinical pharmacy services, health and wellness products. 

In the fourth quarter ended March 3, Rite Aid reported net income of $767.1 million, or 73 cents a share, compared to a net loss of $21 million, or two cents a share in the year ago period. Revenues were down 8.6% to $5.4 billion compared to $5.9 billion thanks to deteriorating retail pharmacy sales during the quarter. Same store sales from Retail Pharmacy continuing operations for the quarter decreased 1.7% over the prior year, consisting of a 2.3% decrease in pharmacy sales and a 0.6% in front-end sales.

Rite Aid currently operates 2,548 stores in 19 states. 

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