Albertsons Deal Means Rite Aid Gets 18 Cents a Share, Not $6.50

(Bloomberg) -- A year ago, Rite Aid Corp. was ready to be bought by Walgreens Boots Alliance Inc. for at least $6.50 per share in cash.

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

With the Albertsons takeover, Rite Aid’s shareholders will get at most 18.3 cents in cash for every share they own, plus Albertsons stock. It’s a fraction of the cash the company was once anticipating, and the deal asks the drugstore chain’s investors to take a leap of faith that everything will work out for the best.

“Both players are under massive profit pressure and there is no clear solution to their competitive/margin threats via this combination,” Ross Muken, an analyst with Evercore ISI, said in a note.

Investors soured on the takeover over the course of the day. Rite Aid shares were up as much as 33 percent before the market opened. They’ve since pared those gains to 1.4 percent as of 2:04 p.m. in New York.

Both companies have had their troubles.

Rite Aid shares have plummeted more than 60 percent in the past year, as its takeover by Walgreens fell apart amid antitrust scrutiny. Walgreens eventually agreed to buy 1,932 Rite Aid stores, leaving behind a far smaller company with an uncertain future.

Albertsons has been backed by private equity firm Cerberus Capital Management LP. Last year, the supermarket chain put plans for an initial public offering on hold after Amazon.com Inc. acquired Whole Foods Market Inc., according to people familiar with the situation. Because the combined company will be publicly traded, the Rite Aid deal will give Cerberus a path to exit its investment without having to do an IPO in a volatile market.

To contact the reporters on this story: Robert Langreth in New York at rlangreth@bloomberg.net, Ivan Levingston in New York at ilevingston@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Mark Schoifet

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