Alden Global Capital Takes 25% Stake in Fred's
December 22 2016 - 6:03PM
Dow Jones News
By David Benoit
Pharmacy chain Fred's Inc. handed an activist investor a quick
gain this week.
The small pharmacy operator's shares shot up 81% on Tuesday
after it announced it would more than double its size by purchasing
865 stores Rite Aid Corp. needs to sell to close its merger with
Walgreens Boots Alliance Inc.
The deal paid off handsomely for small activist, Alden Global
Capital, which had been quietly building a large stake in Fred's,
according to a person familiar with the matter and a document
reviewed by The Wall Street Journal. The hedge fund kept buying
even after the rise and now owns nearly 25%.
Alden supports the deal and believes the stock is undervalued
even after this week's huge bump, the person said. The firm plans
to talk to Fred's about the deal, capital allocation and the makeup
of its board, the person added.
A Fred's representative wasn't immediately available to comment
Thursday.
All told, the purchase cost Alden about $158 million and was
worth $180 million as of Thursday's close, a quick 14% return.
The size of Alden's stake in Fred's is unusual for an activist,
who typically stay under 10% before disclosing their positions. It
is likely to give Alden considerable sway if it wants to seek a
board seat in the future.
In 2010, William Ackman teamed up with Steven Roth's Vornado
Realty Trust to amass a combined 26% stake in retailer J.C. Penney
Co. The purchase kicked off a still-simmering battle among
corporate defenders and activists about whether the Securities and
Exchange Commission should force activists to disclose positions
faster once they cross the 5% reporting threshold. Activists are
allowed to continue buying after crossing the threshold but must
report within 10 days of passing the mark.
Fred's had 650 stores as of Oct. 29 and is financing the
all-cash deal by pledging nearly all of its assets for $1.65
billion in loans. It will pay $950 million for the stores. Chief
Financial Officer Rick Hans said it got a "very good" price for the
stores.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
December 22, 2016 17:48 ET (22:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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