Albertsons, Rite Aid really really want this merger
As Albertsons and Rite Aid investors prepare for an August merger vote, both companies are trying hard to convince shareholders that they can battle competitors better together.
The merger of Albertsons' grocery operations with Rite Aid's pharmacy business would result in the creation of a $24 billion company. However, severe stockholder and investor opposition has caused extreme delays in any merger progress.
With investors expected to hold a roughly 29 percent stake in the new company, some have pushed back against the merger, pointing to Albertsons' recent performance struggles. The shares of the pharmacy chain have dropped approximately 24 percent since announcing the merger plan in February.
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.
Rite Aid executives have initiated a campaign to convince skeptical shareholder that their merger would be the best decision for its company, after the pharmaceutical company released its deteriorating sales report. 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.
The argument presented from both companies is that increased size equals increased ability to compete with other retailers at a competing price. It could also give Albertsons and Rite Aid a greater ability to find $375 million in cost-savings that would help the two invest in necessary technology for the future, the companies argue. The two would have a particularly large presence on the East and West coasts.