Go to www.riteaidmerger.com or contact Chris Komatinsky or Andrew Bode
Los Angeles, CA -- (ReleaseWire) -- 05/11/2018 -- Rite Aid, the Camp Hill Pennsylvania-based drugstore chain, announced an agreement to merge with privately held Albertsons on February 20, 2018. As information to assess this deal becomes available, Rite Aid Shareholders like us do not like what we see.
We see a merger agreement that grossly undervalues the remaining Rite Aid assets and overvalues Albertsons assets. From the 06 April Albertsons Form S-4, the Rite Aid Board relied upon a "fair value" opinion from Citigroup for Rite Aid of $1.83 to $2.96 per share and for Albertsons of $23.42 to $29.06 a share. We fail to see how this valuation can be "fair" given Rite Aid's just finished sale of Rite Aid 1,900 lower performing pharmacies and 3 distribution centers for $4.375 billion and Albertsons failure to execute an initial public offering of shares due to low demand and poor investor sentiment towards traditional grocers.
We see a merger agreement that raises the investment risks of Rite Aid shareholders by merging Rite Aid into a deeply indebted Albertsons entity that operates in a highly competitive food retailing business. In the last year, Rite Aid has successfully sold assets at attractive prices to smartly reduce outstanding debt. Conversely, in the last year, Albertsons has paid a $250 million dividend to its private shareholders and executed a sale/leaseback of $1 billion in assets to fund capital spending rather than manage leverage. Meanwhile, the food retailing business has gotten more competitive with Amazon's purchase of Whole Foods and all major food retailers entry into the meal kit, pick-up and home delivery markets. To further dampen the outlook of the merged company's equity value, Albertsons investors will be looking to cash out of their merged company,positions as soon as their relatively short lock-up periods expire.
That's just our assessment. What is the market saying about the proposed merger? The stock market has assessed the value and risks of this merger with a precipitous price drop of 30% in Rite Aid stock from its price on the day of the merger announcement. Moody's has completed their assessment of the new debt to be issued to implement the proposed merger (rating of Ba2 - speculative and subject to substantial credit risk) and assigned a negative outlook due to pricing pressures in the food and drug retail sector, meaningful integration and execution risks, and high debt leverage. Both the equity and debt markets have shown zero excitement for the proposed merger.
One Rite Aid shareholder has set up a website, http://www.riteaidmerger.com, for further information and for shareholders to note their intent to vote "Against" the proposed merger when proxies are sent out. Join hundreds of other individual investors and log your e-mail and shareholding in the table provided so we can send Rite Aid Management the message loud and clear.
Contact individual shareholder volunteers Chris Komatinsky (310-947-4507 or firstname.lastname@example.org) or Andrew Bode (970-765-8450 or email@example.com) if you have any questions or want to join the effort privately.
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Email: Click to Email Chris Komatinsky