Acme and Safeway owner Albertson’s Companies and Rite Aid Corporation announced a definitive merger agreement under which the private equity owned Albertsons Companies will merge with publicly traded Rite Aid in a cash and stock deal.
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 percent stake in the combined company.
Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons Companies will have approximately 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.
Albertson’s primarily owned by Cerberus, a private equity company that briefly owned Chrysler and was recently in the news in Chapter 11 bankruptcy filing for firearms maker Remington.
Current Rite Aid CEO John Standley will become CEO of the combined company, with current Albertsons Companies CEO Bob Miller serving as Chairman. The name of the combined company will be determined by transaction close.
The combined business is expected to generate year one revenues of approximately $83 billion.
The combined company expects to deliver $375 million in cost reductions. Drug stores have added larger grocery departments and grocery stores operate large drug departments.
Rite-Aid has long been the second largest drug chain in Delaware but has seen growing competition from CVS.
Rite-Aid has worked to recover from an accounting scandal and lackluster earnings. It recently sold a large chunk of its stores to rival Walgreens.
Albertson’s operates Acme and four Safeway stores in the state. Acme also acquired a few Pathmark locations in northern New Castle County.
Acme has suffered from a decline in market share from locally owned Shoprite stores as well as Walmart. Shoprite is now believed to have the largest market share in northern Delaware.
Acme has closed stores in Maryland and there has long been speculation that some marginal locations might be closed.