Albertsons, Rite Aid scrap marriage as shareholders object

Albertsons Cos. and Rite Aid Corp. said they are pulling the plug on an agreement in which grocer Albertsons would acquire drugstore chain Rite Aid after two prominent proxy advisors recommended shareholders vote against the deal.

“While we believed in the merits of the combination with Albertsons, we have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a standalone company,” said Rite Aid Chief Executive John Standley in a statement Wednesday.

Albertsons — operator of Albertsons, Vons, Pavilions and Safeway supermarkets — in its statement blamed the deal’s demise on “certain Rite Aid stockholders and third-party advisory firms that, although they acknowledged the strategic logic of the combination, did not believe that Albertsons Cos. was offering sufficient merger consideration to Rite Aid stockholders.” Albertsons’ board was unwilling to sweeten the terms of the transaction, the company said.

The two companies said a special shareholders meeting about the transaction scheduled for Thursday would not take place. Neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination, according to the companies’ statements.

The takeover would have given Rite Aid a buyer after its failed merger with Walgreens Boots Alliance Inc. last year as well as bulked up the two companies against escalating competition from Amazon.com and other online retailers.

But in the weeks leading up to the deal, two prominent proxy advisors recommended that shareholders vote against the deal.

It “does not appear that Rite Aid shareholders would receive a fair ownership interest in the combined company,” said Institutional Shareholder Services Inc. in a report in late July.

And on July 24, Glass Lewis & Co. recommended that shareholders vote against the transaction, saying it would yield no premium for Rite Aid holders and that negotiations had been marred by possible conflicts of interest.

No value was ever disclosed for the deal, which would have given Rite Aid stockholders either Albertsons stock or a combination of Albertsons stock and cash.

In February, when the transaction was announced, the Wall Street Journal said the transaction valued the two companies at $24 billion, including debt.

Albertsons shareholders would have ended up owning nearly three-quarters of the combined company. The resulting firm would have had about 4,900 stores, including 4,350 pharmacy locations, in 38 states. The Albertsons pharmacies were to have been rebranded under the Rite Aid name.