=Rite Aid (RAD) to be acquired by Albertsons Companies

The agreement calls for Albertsons to acquire Rite Aid in a cash-and-stock deal, with Rite Aid shareholders owning between 28 percent and 29.6 percent of the combined company.  The grocery company from Idaho will buy the part of Rite Aid that is not being sold to Walgreens.

• Combined company will trade on the NYSE 
• The combined company would have about 4,900 locations in 38 states and the District of Columbia and combined revenue of $83 billion on a pro forma basis.
• If the deal closes as proposed, it would essentially split the Rite Aid chain. Rite Aid, which is based in Camp Hill, Pa., agreed last year to sell 1,932 stores and three distribution centers to Walgreens for $4.38 billion after trying to complete an even bigger deal.
• The deal comes at a time when retailers and pharmacy operators are looking for solutions in an increasingly digital world.
• The latest transaction would boost the footprint of Albertsons, which operates more than 2,300 stores in 35 states and the District of Columbia under Albertsons, Safeway and other brands.
• Albertsons, whose parent is owned by a consortium of investors led by Cerberus Capital Management, operates more than 1,700 in-store pharmacies as part of its business.

Rite Aid and Albertsons Companies to merge; combined company will trade on the NYSE 

Privately held Albertsons Companies will merge with publicly traded Rite Aid.

• In exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either (i) one share of Albertsons Companies common stock plus ~$1.83 in cash or (ii) 1.079 shares of Albertsons Companies stock. Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28.0 percent to 29.6 percent stake in the combined company, and current Albertsons Companies shareholders will own a 70.4 percent to 72.0 percent stake in the combined company on a fully diluted basis. Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons Companies will have ~392.9 million shares outstanding on a pro forma and fully diluted basis.
• Following the close of the transaction and the share exchange, Albertsons Companies' shares are expected to trade on the New York Stock Exchange. Albertsons Companies is backed by an investment consortium led by Cerberus Capital Management, which also includes Kimco Realty (KIM), Klaff Realty LP, Lubert-Adler Partners LP, and Schottenstein Stores Corporation.
• Current Rite Aid Chairman and Chief Executive Officer John Standley will become Chief Executive Officer of the combined company, with current Albertsons Companies Chairman and Chief Executive Officer Bob Miller serving as Chairman. The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pennsylvania. The name of the combined company will be determined by transaction close.
• The integrated company will operate ~4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington, D.C., serving 40+ million customers per week. Most Albertsons Companies pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid stand-alone pharmacies.
• On a pro forma basis, the combined company is expected to generate year one revenues of ~$83 billion (excluding potential revenue opportunities) and year one Adjusted Pro Forma EBITDA of ~$3.7 billion (including run rate cost synergies). The combined company's pro forma net leverage ratio is expected to be 3.8x at transaction close (including run rate cost synergies). The combined company expects to deliver annual run-rate cost synergies of $375 million in ~three years and access potential annual revenue opportunities of $3.6 billion. Over 60 percent of the cost synergies are expected to be realized within the first two years post-close. Identified revenue opportunities primarily include partnering with payors, including Rite Aid's PBM, EnvisionRx, through preferred networks to drive additional high-value customers, connecting Rite Aid's reliable pharmacy customer base to Albertsons Companies through loyalty programs and targeted marketing, leveraging Albertsons Companies' grocery capabilities and Rite Aid's pharmacy expertise to enhance the customer offering, and driving traffic through the omni-channel experience. Cost synergies will be achieved primarily through procurement savings, leveraging efficiencies realized by a combined supply chain, combined distribution and fulfillment channels, and leveraging manufacturing capabilities.