Shareholder vote set for Albertsons-Rite Aid merger

Some Rite Aid stockholders rallying other investors to oppose deal

Nearly six months after being announced, and more than four months after clearing a key regulatory hurdle, the proposed Albertsons-Rite Aid merger will come to a shareholder vote.

Rite Aid said Thursday that it has scheduled an Aug. 9 special meeting of stockholders for a vote on the $24 billion deal, which the companies unveiled Feb. 20. If approved, the agreement would take privately held Albertsons Cos. public, and its shareholders would hold a majority stake in the combined company.

The merger has been unanimously approved by the boards of both companies, and the Hart-Scott-Rodino (HSR) waiting period expired March 28. Pending approval of Rite Aid shareholders, regulatory clearance and other customary closing conditions, the transaction is expected to close early in the second half of 2018.

In recent weeks, media reports have surfaced about opposition to the merger by some Rite Aid shareholders. They claim the proposed deal greatly undervalues Rite Aid — notably its health care assets, led by its EnvisionRx pharmacy benefit manager — and would meld the drug chain with a supermarket company at a time when the grocery industry is under attack from a slew of traditional and emerging competitors.

Opposing shareholders also said Rite Aid stock has dropped 30% since the merger was announced, and they have objected to the Rite Aid board of directors’ approval of retention bonuses for top executives if the deal falls through.

Rite Aid investor Chris Komatinsky, who with his family owns approximately 1.5 million Rite Aid shares, has been rallying other company stockholders to vote against the deal.

“We've received a flood of additional individual shareholders with like views on the proposed merger in the past few days and have breached the 34 million share count against the proposed merger,” Komatinsky said in a press release last week. “We're still working to engage with large institutional shareholders for their support against the merger as well. We're real, we're rational, we've assembled a large block of shares and we're ready to have a discussion on maximizing Rite Aid shareholder value.”

Under the merger pact, Rite Aid shareholders — in exchange for every 10 shares of Rite Aid common stock — can elect to receive one share of Albertsons Cos. common stock plus about $1.83 in cash or 1.079 shares of Albertsons Cos. stock. Depending on the results of cash elections, Rite Aid shareholders would own a 28% to 29.6% stake, and current Albertsons Cos. shareholders would own a 70.4% to 72% interest in the combined company on a fully diluted basis.

Plans call for Rite Aid Chairman and CEO John Standley to become chief executive of the merged company, with current Albertsons Chairman and CEO Bob Miller serving as chairman. The company would be managed by executives from both organizations and have dual headquarters in Boise, Idaho, and Camp Hill, Pa.

The transaction would join the nation’s second-largest supermarket operator with its third-largest drug chain. Overall, the company would generate pro forma revenue of about $83 billion and operate roughly 4,900 stores, 4,350 pharmacies and 320 in-store health clinics across 38 states and Washington, D.C., serving more than 40 million customers per week.

If the deal is completed, most Albertsons Cos. pharmacies would be converted to the Rite Aid banner, the companies said. The name of the merged company is stlated to be determined by the close of the transaction.

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