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Grocery store chain Albertsons, drugstore Rite Aid unveil tie-up

Grocery store chain Albertsons, drugstore Rite Aid unveil tie-up

Grocery store chain Albertsons, drugstore Rite Aid unveil tie-up

(Albertsons has about 2% of the prescription market.) Albertsons executives said on a conference call in the morning that pharmacy customers spend more than twice as much on groceries per week as the average customer, and Rite Aid's name could bring in new shoppers.

Albertsons owns about 2,300 supermarket stores mainly on the east and west coasts of the United States and also operates about 1,800 pharmacies. Its same-store pharmacy sales have been slumping for more than a year, while those of CVS and Walgreens have been stronger.

The takeover serves several purposes which includes, Rite Aid will get a buyer after a failed merger with another chain in previous year. Rite Aid has regulatory approval to sell 1,932 stories to Walgreens Boots Alliance Inc. for $4.38 billion. Walgreens initially proposed buying all of Rite Aid, but was blocked by regulators.

Walgreen has said it plans to close roughly 600 overlapping stores but hasn't said where. On the closing of the deal, the current Albertsons stakeholders will own over 72% and the Rite Aid will own up to 29.6% in the combined company. The price of the Albertsons' transaction was not disclosed.

On Tuesday, the company made a deal with Albertsons Cos. for a whole lot less.

The merger is expected to create savings of $375m, a joint statement said.

When Albertsons announced on Tuesday it was buying, it touted a better ability to serve pharmacy customers as one of the deal's many potential benefits. Amazon is increasingly present in the physical market, which means that scale will become more important for other companies. The combined company is expected to generate 2018 revenues of $83 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $3.7 billion. That deal could turn numerous chain's 9,800 stores into one-stop-shop locations for an array of health care needs like blood work and eye or hearing care in addition to their traditional role of filling prescriptions.

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"With the other two major, larger pharmacy companies, Walgreen Boots Alliance and CVS, becoming vertically integrated by acquiring pharmacy benefits managers and health insurers, and with Rite Aid's recent failure to sell itself entirely to Walgreens (the company is in the process of transferring 1,932 of its 4,600 stores to Walgreens), the pressure on Rite Aid to do some kind of deal is enormous".

For perhaps the second time in his long career, Bob Miller may be a white knight for Rite Aid shareholders.

A number of hedge funds have recently bought and sold shares of the business.

Boise-based Albertsons Cos. operate stores across 35 states and Washington, D.C., under 20 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs, as well as meal kit company Plated based in NY. Shareholders of Boise, Idaho-based Albertsons, which is now private held, will own more than 70 percent of the combined company. The companies say they will keep headquarters in both Boise and Camp Hill.

Rite Aid Corporation (NYSE:RAD) reported its EPS in the last quarter as $0/Share beating the analyst estimate of $-0.02/Share by a difference of $0.02.

The Associated Press contributed to this article.

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