Grocery chain Albertsons and drug retailer Rite Aid have agreed to a merger, greatly expanding the footprint of the struggling pharmacy chain.
When Walgreens' proposed acquisition of rival Rite Aid fell through last year because of regulatory resistance, Walgreens agreed to purchase about 2,000 Rite Aid locations, leaving Rite Aid a much smaller company.
But the proposed deal with Albertsons would suddenly make Rite Aid a lot larger.
Besides the stores bearing the Albertsons name, the company operates Jewel-Osco, Shaw's, Safeway, Vons, and Acme stores. Most of the grocery store pharmacies will be re-branded as Rite Aid, the two companies said. Stand-alone Rite Aid stores will continue to operate with few, if any changes.
Once the merger takes place, there will be nearly 4,900 company locations, with 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C.
"This powerful combination enables us to become a truly differentiated leader in delivering value, choice, and flexibility to meet customers' evolving food, health, and wellness needs," said Rite Aid CEO John Standley, who will become CEO of the combined enterprise. Albertsons CEO Bob Miller will become chairman.
The deal would reverse Rite Aid's shrinking footprint. The new company will reportedly be ranked first or second in 66 percent of the top metropolitan areas in the United States and in 70 percent of pharmacy locations. Standley explains that the merger will strengthen both companies' positions on the West Coast and in the Northeast.
"The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint," he said. "We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders."
The merger will have to pass muster with government regulators, but analysts say it should not encounter the same difficulties the Walgreens merger did, since the two companies are not direct competitors.