What's next for Albertsons, Rite Aid?

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What's next for Albertsons, Rite Aid?

By Gina Acosta - 08/09/2018
Rite Aid and Albertsons announced Wednesday that they had terminated their merger agreement.

The collapse of their merger raises questions about Rite Aid's future as a standalone company and whether Albertsons can find the cash to revamp its business model. 

Rite Aid and Albertsons announced Wednesday that they had terminated their merger agreement. The merger announced in February had faced intense opposition from shareholders of both companies, as well as advisory groups. 

“While we believed in the merits of the combination with Albertsons, we have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a standalone company,” said Rite Aid Chairman and Chief Executive Officer John Standley. “We remain focused on leveraging our network of conveniently located retail pharmacies, our EnvisionRxOptions PBM and our trusted brand of health and wellness offerings. We will continue building momentum for key areas of our business like our innovative Wellness store format, highly successful customer loyalty program and expanded pharmacy service offerings, as we also enhance our omnichannel and own brand offerings to strengthen our competitive position and create long-term value for stockholders.”

Both companies had made the case that a combined "wellness" company would evolve in significant and profitable ways. 

Rite Aid had said it hoped to reinvent itself with the help of Albertsons, while the grocery chain said it hoped to use the merger to eventually go public and raise cash to revamp its store portfolio. 

The combined company was supposed to have about 4,900 locations with 4,350 pharmacies and 320 clinics serving more than 40 million customers a week, creating the largest grocery chain in the U.S. 

With the deal now off, both retailers face competitive challenges as standalone companies, but none more so than Rite Aid. The drug chain is competing in a sector that is challenged by Amazon entering the online pharmacy business and other evolving dynamics in health care and retail. And the top two drug chains, CVS and Walgreens, are both heavily investing in health care and leading the sector.

For now, Rite Aid said Wednesday that its board of directors is evaluating governance changes at the company.

Meanwhile, Albertsons announced this week before the merger collapse that it would invest $50 million in a grocery innovation incubator.

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