Rite Aid surges on Albertsons merger plan

Shares in drugstore chain Rite Aid surged in pre-market trade on Tuesday as it agreed for grocery chain Albertsons to buy the remainder of the company that isn't being sold to Walgreens Boots Alliance.

Under the terms of the agreement, for every 10 Rite Aid shares, holders will receive either one share of Albertsons common stock plus around $1.83 in cash, or 1.079 shares. Rite Aid shareholders will own a 28% to 29.6% stake in the company, depending on the results of cash elections, while Albertsons shareholders will own the rest.

On a pro-forma basis, the combined company is expected to generate year one revenues of around $83bn and year one adjusted pro-forma earnings before interest, tax, depreciation and amortisation of $3.7bn. The combined group expects to deliver annual run-rate cost synergies of $375m in approximately three years and access potential annual revenue opportunities of $3.6bn.

The integrated company will operate around 4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington DC, serving more than 40m customers a week. Most Albertsons pharmacies will be rebranded as Rite Aid and the company will continue to operate Rite Aid stand-alone pharmacies.

Current Rite Aid chairman and chief executive officer John Standley will become CEO of the combined group, with current Albertsons chairman and CEO Bob Miller serving as chairman.

Standley said: "This powerful combination enables us to become a truly differentiated leader in delivering value, choice, and flexibility to meet customers' evolving food, health, and wellness needs.

"The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint. We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders."

At 1230 GMT, Rite Aid shares were up 28% in pre-market trade to $2.73.