The Rite Aid pharmacy chain announced on Wednesday it had called off its proposed merger with Albertsons, the grocery retailer, after the deal appeared to lose the support of its shareholders.
Michael Corkery of the New York Times had the news:
The announcement came on the eve of a special meeting of Rite Aid shareholders to consider the merger. That meeting will not take place, the company announced.
“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 stand-alone company,” said John T. Standley, the pharmacy chain’s chief executive.
The companies said they had mutually agreed to terminate the merger, and that neither would be responsible for any payments to the other side.
Albertsons said in a statement that it disagreed with “the conclusion of certain Rite Aid stockholders and third-party advisory firms” that the deal undervalued the drugstore chain, but would not alter the terms of the deal.
Lauren Hirsch of CNBC.com reported that large investors opposed the deal:
The $24 billion deal, announced in February, has faced push-back from a number of retail investors as well as top ten shareholder Highfields Capital Management. Critics have argued the deal provides Albertsons’ private equity owner, Cerberus Capital Management, a vehicle to take the company public without rewarding Rite Aid shareholders in turn.
Adding to mounting challenges, influential investor advisory firms Glass Lewis and Institutional Shareholder Services in July urged investors to vote against the tie-up.
Albertsons, though, said Wednesday it was unwilling to renogotiate the terms of the deal
“After careful consideration of all information available to our board of directors through today, we were unwilling to change the terms of the merger,” it said in a statement.
Nathan Bomey of USA Today reported that Rite Aid’s future remains unclear:
As its two biggest rivals, CVS and Walgreens, keep getting bigger and more diversified, Rite Aid was hoping to do the same by arranging a tie-up with Albertsons. Privately held Albertsons was hoping to use the deal to go public.
Rite Aid and Albertsons said late Wednesday that they had “mutually agreed” to kill their deal.
The deal’s demise reiterates questions about the future of Rite Aid as a standalone entity. The company has been scrambling to find its footing in recent years as pharmacies face cost pressures in the health care industry, including declining reimbursement funds.
“The termination of the merger with Albertsons leaves Rite-Aid at a big disadvantage as it neither has the scale nor the balance sheet to compete with much larger and well-capitalized rivals like CVS and Walgreens,” Moodys Vice President Mickey Chadha wrote.
