Combination Will Create Strong Local Networks
in Attractive Geographies
Integrated Platform Will Provide Customers
Greater Choice, Convenience, and Access, and Accelerate
Omni-Channel Strategy to Reach More Customers and Drive Profitable
Growth
John Standley to Serve as Chief Executive
Officer and Bob Miller to Serve as Chairman of Combined Company
Transaction Expected to Generate Run Rate Cost
Synergies of $375 Million and Create Incremental Revenue
Opportunities of Over $3.6 Billion
Combined Company Expected to Generate Pro Forma
20181 Revenues of $83 Billion and Adjusted Pro Forma EBITDA of $3.7
Billion (Including Run Rate Cost Synergies)
Albertsons Companies, one of the nation’s largest grocery
retailers, and Rite Aid Corporation (NYSE:RAD), one of the nation’s
leading drugstore chains, announced a definitive merger agreement
under which privately held Albertsons Companies will merge with
publicly traded Rite Aid.
This press release features multimedia. View
the full release here:
http://www.businesswire.com/news/home/20180220005785/en/
Under the terms of the agreement, in exchange for every 10
shares of Rite Aid common stock, Rite Aid shareholders will have
the right to elect to receive either (i) one share of Albertsons
Companies common stock plus approximately $1.83 in cash or (ii)
1.079 shares of Albertsons Companies stock. Depending upon the
results of cash elections, 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 72.0 percent stake in the combined
company on a fully diluted basis. 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.
Albertsons Companies is backed by an investment consortium led
by Cerberus Capital Management, L.P. (“Cerberus”), which also
includes Kimco Realty Corporation (NYSE: KIM), Klaff Realty LP,
Lubert-Adler Partners LP, and Schottenstein Stores Corporation.
Current Rite Aid Chairman and Chief Executive Officer John
Standley will become Chief Executive Officer of the combined
company, with current Albertsons Companies Chairman and Chief
Executive Officer Bob Miller serving as Chairman. The combined
company is expected to be comprised of leadership from both
companies and will be dual headquartered in Boise, Idaho, and Camp
Hill, Pennsylvania. The name of the combined company will be
determined by transaction close.
The integrated company will operate approximately 4,900
locations, 4,350 pharmacy counters, and 320 clinics across 38
states and Washington, D.C., serving 40+ million customers per
week. Most Albertsons Companies pharmacies will be rebranded as
Rite Aid, and the company will continue to operate Rite Aid
stand-alone pharmacies.
The combination will provide customers with flexible and
convenient access to a full range of food, health, and wellness
offerings and will deliver significant value to customers,
employees, and shareholders by:
- Enhancing
Geographic Footprint and Creating Local Networks in Attractive
Geographies. The new company will have an expanded footprint
and be ranked first or second in 66 percent of the top metropolitan
areas in the United States and will be ranked first or second in 70
percent of pharmacy locations2. It will establish the leading
integrated food, health, and wellness retailer on the West Coast
and will have a strong brand position in the Northeast.
- Leveraging Strong
Pharmacy Network and Rite Aid’s Pharmacy Benefit Management
Company, EnvisionRxOptions, to Drive Customer Growth. The
combined company will be positioned to drive incremental growth by
deepening existing relationships and expanding reach across
higher-value pharmacy customers. This will be achieved through a
full suite of health and wellness capabilities, including specialty
pharmacy offerings and in-store RediClinics in larger Albertsons
Companies stores and stand-alone Rite Aid stores. In addition,
investing in preferred relationships with EnvisionRxOptions, other
PBMs, and regional payors is expected to drive prescription
growth.
- Utilizing Data
Analytics and Integrated Loyalty Programs to Drive Growth and
Target New Customers. The new company will capitalize on
enhanced data and analytics to unlock profitable growth through new
customer acquisition, new merchandising programs, and demand
forecasting. It will also create cross-branded opportunities for
its loyalty programs, improving connections across a combined
current base of 25 million active loyalty program
participants.
- Combining Strong
Own Brand Portfolios with Extensive Manufacturing and Distribution
Network to Drive Revenue Growth and Operating Efficiencies.
The combination of Albertsons Companies’ billion dollar own brands,
including O Organics and Lucerne®, and its manufacturing and
operating capabilities, with Rite Aid’s own brands in health and
wellness, including B4Y™ and Daylogic™, and its pharmacy expertise
will allow the combined company to drive growth opportunities and
efficiencies across its purchasing, marketing, manufacturing, and
merchandising functions.
- Serving Customers
When, Where, and How They Want to Shop. The combined
company’s expanding omni-channel platform will provide customers
with convenience, choice, and flexibility through multiple in-store
formats, digital channels, and same-day food and prescription
delivery options from stores and via Drive Up & Go.
“This powerful combination enables us to become a truly
differentiated leader in delivering value, choice, and flexibility
to meet customers’ evolving food, health, and wellness needs,” said
Rite Aid Chairman and Chief Executive Officer John Standley. “The
combined platform positions Rite Aid to capitalize on our pharmacy
expertise and expand and enhance our pharmacy footprint. We are
confident that delivering improved customer experiences and value
will drive growth and profitability while creating compelling
long-term value for shareholders.”
“The hallmark of Albertsons Companies’ business has been to
become the favorite local supermarket of our customers,” said Bob
Miller, Albertsons Companies Chairman and Chief Executive Officer.
“We have always put our customers first, and our combination with
Rite Aid will enable us to even better serve the valuable pharmacy
customer by providing a fully integrated one-stop-shop for our
customers’ food, health, and wellness needs. I have long known the
excellent management team at Rite Aid, and we share a singular
focus on superior customer service and a clear vision and strategy
to become the favorite local supermarket and pharmacy to shoppers
in every neighborhood we serve.”
Lenard Tessler, Vice Chairman and Senior Managing Director at
Cerberus, commented, “As a long-term partner to Albertsons
Companies’ world-class management team, this transaction highlights
Cerberus’s confidence in this team and our conviction in the
underlying customer focus driving this combination. As significant
shareholders, we are very optimistic about the future of the
combined company.”
Financial Details
The combined business will benefit from an enhanced financial
profile and solid capital structure, which will support growth and
expansion. On a pro forma basis, the combined company is expected
to generate year one revenues of approximately $83 billion
(excluding potential revenue opportunities) and year one Adjusted
Pro Forma EBITDA of approximately $3.7 billion (including run rate
cost synergies). The combined company’s pro forma net leverage
ratio is expected to be 3.8x at transaction close (including run
rate cost synergies).
The combined company expects to deliver annual run-rate cost
synergies of $375 million in approximately three years and access
potential annual revenue opportunities of $3.6 billion. Over 60
percent of the cost synergies are expected to be realized within
the first two years post-close. Identified revenue opportunities
primarily include partnering with payors, including Rite Aid’s PBM,
EnvisionRx, through preferred networks to drive additional
high-value customers, connecting Rite Aid’s reliable pharmacy
customer base to Albertsons Companies through loyalty programs and
targeted marketing, leveraging Albertsons Companies’ grocery
capabilities and Rite Aid’s pharmacy expertise to enhance the
customer offering, and driving traffic through the omni-channel
experience. Cost synergies will be achieved primarily through
procurement savings, leveraging efficiencies realized by a combined
supply chain, combined distribution and fulfillment channels, and
leveraging manufacturing capabilities.
Governance
The board of directors will be comprised of nine directors, four
of whom will be named by Albertsons Companies (including Bob Miller
and Lenard Tessler), four of whom will be named by Rite Aid
(including John Standley), and one of whom will be a jointly
selected director. A majority of the Board will be independent.
Lenard Tessler will serve as Lead Director.
Approvals and Timing
The transaction has been approved unanimously by the boards of
directors of both companies. The merger is expected to close early
in the second half of calendar year 2018, subject to the approval
of Rite Aid’s shareholders, regulatory approvals, and other
customary closing conditions.
Advisors
Credit Suisse and Goldman Sachs & Co. LLC served as lead
financial advisors to Albertsons Companies and Schulte Roth &
Zabel LLP acted as legal advisor. Bank of America Merrill Lynch
also served as financial advisor to Albertsons Companies and is
providing committed financing for the proposed transaction together
with Credit Suisse and Goldman Sachs.
Citi served as exclusive financial advisor to Rite Aid, and
Skadden, Arps, Slate, Meagher and Flom LLP acted as legal
advisor.
Investor Call
An analyst call will be conducted at 8:30 a.m. Eastern Time
today with remarks by both management teams. The call will be
simulcast via the internet and can be accessed in the Investor
Relations sections of www.riteaid.com and
www.albertsonscompanies.com, along with an accompanying investor
presentation. You may participate in the call by dialing (877)
654-4425 within the U.S. and Canada or (706) 679-0005 outside of
the U.S. and Canada. The reservation number is: 9687728.
A playback of the call will also be available by telephone
beginning at 12 p.m. Eastern Time today until 11:59 p.m. Eastern
Time on March 6, 2018. The playback number is 1-855-859-2056 from
within the U.S. and Canada or 1-404-537-3406 from outside the U.S.
and Canada with the reservation number 9687728.
About Albertsons Companies
Albertsons Companies is one of the largest food and drug
retailers in the United States, with both a strong local presence
and national scale. We operate stores across 35 states and the
District of Columbia under 20 well-known 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 New York City.
Albertsons Companies is committed to helping people across the
country live better lives by making a meaningful difference,
neighborhood by neighborhood. In 2016 alone, along with the
Albertsons Companies Foundation, the company gave nearly $300
million in food and financial support. These efforts helped
millions of people in the areas of hunger relief, education, cancer
research and treatment, programs for people with disabilities and
veterans outreach.
About Rite Aid Corporation
Rite Aid Corporation (NYSE: RAD) is one of the nation's leading
drugstore chains with fiscal 2017 annual revenues of $32.8 billion.
The Company also owns EnvisionRxOptions, a multi-faceted healthcare
and pharmacy benefit management (PBM) company supporting a
membership base of more than 22 million members; RediClinic, a
convenient care clinic operator with locations in Delaware, New
Jersey, Pennsylvania, Texas and Washington; and Health Dialog, a
leading provider of population health management solutions
including analytics, a multi-channel coaching platform and shared
decision-making tools. Information about Rite Aid, including
corporate background and press releases, is available through the
company's website at www.riteaid.com.
About Cerberus Capital Management, L.P.
Established in 1992, Cerberus Capital Management, L.P. is a
global leader in alternative investing with more than US $34
billion under management across complementary credit, private
equity, and real estate strategies. From its headquarters in New
York City and network of affiliate and advisory offices in the
United States, Europe, and Asia, Cerberus has the on-the-ground
presence to invest in multiple asset classes globally.
Important Notice Regarding Forward-Looking Statements and
Non-GAAP Measures
This press release contains certain “forward-looking statements”
within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, both as amended by the Private Securities
Litigation Reform Act of 1995. Statements that are not historical
facts, including statements about the pending merger between
Albertsons Companies Inc. (“Albertsons Companies”) and Rite Aid
Corporation (“Rite Aid”) and the transactions contemplated thereby,
and the parties perspectives and expectations, are forward looking
statements. Such statements include, but are not limited to,
statements regarding the benefits of the proposed merger,
integration plans, expected synergies and revenue opportunities,
anticipated future financial and operating performance and results,
including estimates for growth, the expected management and
governance of the combined company, and the expected timing of the
transactions contemplated by the merger agreement. The words
“expect,” “believe,” “estimate,” “intend,” “plan” and similar
expressions indicate forward-looking statements. These
forward-looking statements are not guarantees of future performance
and are subject to various risks and uncertainties, assumptions
(including assumptions about general economic, market, industry and
operational factors), known or unknown, which could cause the
actual results to vary materially from those indicated or
anticipated. Such risks and uncertainties include, but are not
limited to, risks related to the expected timing and likelihood of
completion of the pending merger, including the risk that the
transaction may not close due to one or more closing conditions to
the transaction not being satisfied or waived, such as regulatory
approvals not being obtained, on a timely basis or otherwise, or
that a governmental entity prohibited, delayed or refused to grant
approval for the consummation of the transaction or required
certain conditions, limitations or restrictions in connection with
such approvals, or that the required approval of the merger
agreement by the stockholders of Rite Aid was not obtained; risks
related to the ability of Albertsons Companies and Rite Aid to
successfully integrate the businesses; the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement (including circumstances
requiring a party to pay the other party a termination fee pursuant
to the merger agreement); the risk that there may be a material
adverse change of Rite Aid or Albertsons Companies; risks related
to disruption of management time from ongoing business operations
due to the proposed transaction; the risk that any announcements
relating to the proposed transaction could have adverse effects on
the market price of Rite Aid’s common stock, and the risk that the
proposed transaction and its announcement could have an adverse
effect on the ability of Albertsons Companies and Rite Aid to
retain customers and retain and hire key personnel and maintain
relationships with their suppliers and customers and on their
operating results and businesses generally; risks related to
successfully integrating the businesses of the companies, which may
result in the combined company not operating as effectively and
efficiently as expected; the risk that the combined company may be
unable to achieve cost-cutting synergies or it may take longer than
expected to achieve those synergies; and risks associated with the
financing of the proposed transaction. A further list and
description of risks and uncertainties can be found in Rite Aid’s
Annual Report on Form 10-K for the fiscal year ending March 4, 2017
filed with the Securities and Exchange Commission (“SEC”), in
Albertsons Companies, LLC's Form S-4 registration statement filed
with the SEC on June 28, 2017, in Albertsons Companies, LLC's
quarterly reports on Form 10-Q filed with the SEC on August 1,
2017, October 23, 2017 and January 1, 2018 and in the Form S-4 that
will be filed with the SEC by Albertsons Companies in connection
with the proposed merger, and other documents that the parties may
file or furnish with the SEC, which you are encouraged to read.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those indicated or anticipated by such
forward-looking statements. Accordingly, you are cautioned not to
place undue reliance on these forward-looking statements.
Forward-looking statements relate only to the date they were made,
and Albertsons Companies, Rite Aid, and their subsidiaries
undertake no obligation to update forward-looking statements to
reflect events or circumstances after the date they were made
except as required by law or applicable regulation.
Adjusted EBITDA (the "Non-GAAP Measure") is a performance
measure that provides supplemental information that Albertsons
Companies and Rite Aid believe is useful to analysts and investors
to evaluate ongoing results of operations, when considered
alongside other GAAP measures such as net income, operating income
and gross profit. This Non-GAAP Measure excludes the financial
impact of items management does not consider in assessing the
ongoing operating performance of Albertsons Companies, Rite Aid, or
the combined company, and thereby facilitates review of its
operating performance on a period-to-period basis. Other companies
may have different capital structures or different lease terms, and
comparability to the results of operations of Albertsons Companies,
Rite Aid, or the combined company may be impacted by the effects of
acquisition accounting on its depreciation and amortization. As a
result of the effects of these factors and factors specific to
other companies, Albertsons Companies and Rite Aid believe Adjusted
EBITDA provides helpful information to analysts and investors to
facilitate a comparison of their operating performance to that of
other companies. The presentation of the Non-GAAP Measure in this
press release should not be construed as an inference that its
future results will be unaffected by unusual or non-recurring
items. A reconciliation of the Non-GAAP Measure has not been
provided because such reconciliation could not be produced without
unreasonable effort.
Additional Information and Where to Find It
In connection with the proposed strategic combination involving
Rite Aid and Albertsons Companies Inc., Rite Aid and Albertsons
Companies Inc. intend to file relevant materials with the SEC,
including that Albertsons Companies Inc. will file a registration
statement on Form S-4 that will include a proxy
statement/prospectus to be distributed to Rite Aid stockholders.
Rite Aid will mail the proxy statement/prospectus and a proxy card
to each stockholder entitled to vote at the special meeting
relating to the proposed merger. INVESTORS ARE URGED TO READ THE
PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. RITE AID’S EXISTING PUBLIC
FILINGS WITH THE SEC SHOULD ALSO BE READ, INCLUDING THE RISK
FACTORS CONTAINED THEREIN.
Investors and security holders may obtain copies of the Form
S-4, including the proxy statement/prospectus, as well as other
filings containing information about Rite Aid, free of charge, from
the SEC’s Web site (www.sec.gov). Investors and security holders
may also obtain Rite Aid’s SEC filings in connection with the
transaction, free of charge, from Rite Aid’s Web site
(www.RiteAid.com) under the link “Investor Relations” and then
under the tab “SEC Filings,” or by directing a request to Rite Aid,
Byron Purcell, Attention: Senior Director, Treasury Services &
Investor Relations. Copies of documents filed with the SEC by
Albertsons Companies Inc. will be made available, free of charge,
on Albertsons Companies’ website at
www.albertsonscompanies.com.
Participants in Solicitation
Rite Aid, Albertsons Companies Inc. and their respective
directors, executive officers and employees and other persons may
be deemed to be participants in the solicitation of proxies from
the holders of Rite Aid common stock in respect of the proposed
transaction. Information regarding Rite Aid’s directors and
executive officers is available in its definitive proxy statement
for Rite Aid’s 2017 annual meeting of stockholders filed with the
SEC on June 7, 2017, as modified or supplemented by any Form 3 or
Form 4 filed with the SEC since the date of such definitive proxy
statement. Information about the directors and executive officers
of Albertsons Companies will be set forth in the Form S-4. Other
information regarding the interests of the participants in the
proxy solicitation will be included in the proxy
statement/prospectus when it becomes available. These documents can
be obtained free of charge from the sources indicated above.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
1 Fiscal year ended February 2019
2 Grocery regional ranks based on Nielsen data for Albertsons
Companies operating divisions and excludes mass retailers. Pharmacy
share based on number of stores vs. competitors.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180220005785/en/
For Albertsons CompaniesINVESTORS:Melissa Plaisance,
(925) 226-5115melissa.plaisance@albertsons.comorMEDIA:Christine
Wilcox, (208) 395-4163christine.wilcox@albertsons.comorFor Rite
AidINVESTORS:Byron Purcell, (717)
975-5809investor@riteaid.comorMEDIA:Ashley Flower, (717)
975-5718aflower@riteaid.comorFor Cerberus Capital Management
L.P.MEDIA:Andrew Johnson, (646) 495-2700ajohnson@gpg.com
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