Board reshuffle at Rite Aid after two failed merger attempts

AFTER TWO failed buyout attempts that could have put it in a better position to compete against larger rivals, Rite Aid is shuffling its board of directors and dividing power at the top of the drugstore chain.

Rite Aid said Thursday that three new, independent directors will be nominated to its board and that CEO John Standley will no longer hold the title of chairman. That goes to current board member Bruce Bodaken.

Shareholders will vote next month on whether to approve new board nominees Robert Knowling Jr, Louis Miramontes and Arun Nayar. They would replace current directors David Jessick, Myrtle Potter and Frank Savage.

The company accelerated a board shake-up after speaking with shareholders in the wake of a failed buyout attempt by the grocer Albertsons, Bodaken said in a prepared statement.

The collapse of the Albertson’s deal followed another proposed buyout, from Walgreens, which ended the same way. Walgreens eventually agreed to buy nearly 2,000 stores from Rite Aid Corp.

Rite Aid, after the sale of its stores, has about 2,500 locations, located mostly on the East and West coasts, as well as a pharmacy benefit management business that runs prescription drug coverage.

It planned to sell those assets in a separate deal with Albertsons, but called off that agreement before a shareholder vote last month. It had already received bad reviews from two prominent shareholder advisory firms and one of the drugstore chain’s biggest stock owners, Highfields Capital Management.

A couple days before it quashed the sale, the Camp Hill, Pennsylvania company slashed its annual earnings forecast.

Rite Aid is trying to hold off bigger, national rivals like Walgreens or CVS Health Corp partially by shoring up its share of business in regions where it already has a big presence. But it’s not getting any easier.

CVS is spending around US$69 billion to acquire health insurer Aetna Inc, and another insurer, Cigna Corp, is spending roughly US$52 billion to acquire pharmacy benefit manager Express Scripts Holding Company in a separate deal.

Rite Aid also reported on Thursday fiscal second-quarter earnings that narrowly missed the consensus expectation on Wall Street.

Shares of Rite Aid have plunged more than 30 per cent so far this year, but the stock price climbed three cents to US$1.31 in morning trading, while broader indexes also rose.