Rite Aid gives Albertsons a leg up in health care
Supermarket giant Albertsons is buying part of Rite Aid, the nation’s No. 3 pharmacy chain, as the companies try to navigate sweeping shifts in the food and health care industries.
Rite Aid and Albertsons, the privateequity-backed company that operates Safeway and several other grocery chains, said the deal would create a company with expected 2018 revenue of $83 billion and potential annual earnings of $3.7 billion before interest, taxes, depreciation and amortization.
The deal is aimed at sparking Rite Aid’s expansion as the company competes with retailing giant Amazon, which is eyeing a potential entry into health care, as well as Walmart.
For Albertsons, the deal enables the company to go public after being controlled since 2005 by private equity giant Cerberus Capital Management. Albertsons previously weighed an initial public offering but shelved the plan after Amazon acquired Whole Foods, several media organizations reported.
In all, the new company is expected to serve more than 40 million U.S. customers a week at around 4,900 locations, 4,350 pharmacy counters and
320 health clinics across the U.S. Most Albertsons pharmacies will be given the Rite Aid name, and the combined company will continue to run Rite Aid stand-alone pharmacies, the companies said.
Moody’s Vice President Mickey Chadha said the deal would give the new entity the large scale and diversified revenue base needed to compete in the highly competitive U.S. food and drug retail environment.
Rite Aid is in the process of selling
1,932 of its approximately 4,600 stores to rival Walgreen Boots Alliance. Walgreen and Rite Aid had planned a complete merger, but the federal government blocked that plan on antitrust grounds.