Albertsons to acquire Rite Aid, go public
For perhaps the second time in his long career, Bob Miller may be a white knight for Rite Aid shareholders. Albertsons has agreed to merge with Rite Aid as part of a $24 billion deal that will take the privately-held grocer public.
“The hallmark of Albertsons Companies’ business has been to become the favorite local supermarket of our customers,” Miller, current Albertsons chairman and CEO who led a turnaround at Rite Aid in the early 2000s, said. “We have always put our customers first, and our combination with Rite Aid will enable us to even better serve the valuable pharmacy customer by providing a fully integrated one-stop-shop for our customers’ food, health, and wellness needs. I have long known the excellent management team at Rite Aid, and we share a singular focus on superior customer service and a clear vision and strategy to become the favorite local supermarket and pharmacy to shoppers in every neighborhood we serve.”
Current Rite Aid chairman and CEO John Standley will become CEO of the combined company, with current Albertsons’ Miller serving as chairman. The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pa. The companies said the name of the combined company will be determined by transaction close.
“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,” John Standley, chairman and CEO, Rite Aid, said. “The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint. We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders.”
The integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C., serving more than 40 million customers per week. Most Albertsons pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid standalone pharmacies.
The companies said the combination is expected to leverage a strong pharmacy network and Rite Aid’s PBM, EnvisionRxOptions, to drive significant customer growth. The Albertsons/Rite Aid combo will be positioned to drive incremental growth by deepening existing relationships and expanding reach across higher-value pharmacy customers. This will be achieved, according to an investor presentation, through a full suite of health-and-wellness capabilities, including specialty pharmacy offerings and in-store RediClinics in larger Albertsons Companies stores and stand-alone Rite Aid stores. In addition, investing in preferred relationships with EnvisionRxOptions, other PBMs, and regional payors is expected to drive prescription growth.
The new company — which is expected to be traded on the New York Stock Exchange following the close of the deal — also will have an expanded footprint and be ranked first or second in 66% of the top metropolitan areas in the United States and will be ranked first or second in 70% of pharmacy locations. It will establish the leading integrated food, health and wellness retailer on the West Coast and will have a strong brand position in the Northeast.
Other benefits associated with the proposed merger include:
- Leveraging loyalty programs and data to drive growth and find new customers. The new company will capitalize on enhanced data and analytics to unlock profitable growth through new customer acquisition, new merchandising programs, and demand forecasting, Albertsons and Rite Aid said. It also will create cross-branded opportunities for its loyalty programs, which currently have a combinedbase of 25 million active participants;
- Bringing manufacturing and distribution to bear on own brands. Combining Albertsons’ billion-dollar private-label brands — which include O Organics and Lucerne — and its manufacturing and operating capabilities, with such Rite Aid health-and-wellness own brands as B4Y and Daylogic, as well as its pharmacy expertise, will allow the combined company to drive growth opportunities and efficiencies across its purchasing, marketing, manufacturing, and merchandising functions, the companies said; and
- Strong omnichannel capabilities. The two companies’ expanding omnichannel platform will provide customers with convenience, choice, and flexibility through multiple in-store formats, digital channels, and same-day food and prescription delivery options from stores and via Drive Up & Go.
Under the terms of the agreement, in exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either one share of Albertsons common stock plus approximately $1.83 in cash or 1.079 shares of Albertsons stock.
Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28% to 29.6% stake in the combined company, and current Albertsons shareholders will own a 70.4% to 72% stake in the combined company on a fully diluted basis. Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis.
Albertsons is backed by an investment consortium led by Cerberus Capital Management, which also includes Kimco Realty Corporation, Klaff Realty, Lubert-Adler Partners and Schottenstein Stores Corporation.
The board of directors will be comprised of nine directors, four of whom will be named by Albertsons (including Bob Miller and Lenard Tessler, vice chairman and senior managing director at Cerberus), four of whom will be named by Rite Aid (including John Standley) and one of whom will be a jointly selected director.
A majority of the board will be independent. Lenard Tessler will serve as lead director.
The transaction has been approved unanimously by the boards of directors of both companies. The merger is expected to close early in the second half of calendar year 2018, subject to the approval of Rite Aid’s shareholders, regulatory approvals and other customary closing conditions.
Military’s Exchange beefs up fitness offering through 5 Star Nutrition partnership
Military members and their families can now get expert help at 5 Star Nutrition centers, at select Army & Air Force Exchange Service locations, to help keep themselves in shape throughout the year.
“The Exchange partners with vendors like 5 Star Nutrition to help service members and their families take their fitness to the next level,” Air Force Chief Master Sgt. Luis Reyes, the Exchange’s senior enlisted advisor said. “A ‘BE FIT’ lifestyle is a priority to both military service and an active family life.”
Each 5 Star Nutrition location offers a free consultation, which includes using InBody machines that provide medical-grade body composition analyses to track body fat and lean muscle mass to monitor results. The analysis is combined with customized meal planning and free samples of almost all products for a comprehensive fitness and nutrition plan. All Exchange 5 Star Nutrition locations also offer a 25% discount for active and retired military.
The Exchange is focused on bringing BE FIT products, meals and snacks to soldiers as well as offering national brands to military shoppers at competitive prices.
The Exchange opened its first 5 Star Nutrition at Fort Bliss in 2015, and since then locations have opened at 11 additional locations, including one in West Point.
Since 1895, the Army & Air Force Exchange Service (Exchange) has gone where soldiers and their families go to improve the quality of their lives by providing valued goods and services at exclusive military pricing. As the 56th-largest retailer in the United States, Exchange earnings provided $2.4 billion in dividends to support military morale, welfare and recreation programs over the last 10 years.
The Exchange is a non-appropriated fund entity of the Department of Defense.
H-E-B augments home delivery through Favor Delivery acquisition
H‑E‑B on Thursday augmented its on-demand home delivery service through its acquisition of Favor Delivery, headquartered in Austin. Favor Delivery will become a wholly owned subsidiary of H-E-B.
The terms of the transaction were not disclosed.
“I am thrilled to have H‑E‑B join forces with another well‑respected and innovative Texas company,” Martin Otto, H‑E‑B COO, said. “We share similar values, including a commitment to excellence in customer service and to our greatest resource – our people. Over the past two years, we have established a strong working relationship with Favor that has proven to be immensely successful for both companies. We see a unique opportunity with this partnership to support and accelerate each other’s growth through the sharing of experience, insight and resources.”
“Convenience matters to consumers and retailers have to keep up. So, it’s no surprise to me that H-E-B made a play to acquire an already successful technology company built around convenience to compete with the likes of Instacart,” Casey Gannon, vice president marketing Shopgate, said. “H-E-B now has the opportunity to create personalized experiences based on their buyers’ behavior using sensor data native to their phones and beacon technology within stores. They’ll know how close their buyers are to stores and what they do when in-store, allowing them to cater to consumers’ preferences using a mobile-first environment.”
Favor will continue to operate independently as a separate brand led by CEO and president, Jag Bath. H‑E‑B will retain all of Favor’s employees and its 50,000 Runners, who operate as contract delivery drivers.
With this partnership, H‑E‑B accelerates its path to become a digital retail industry leader in Texas, enabling customers to choose how they shop, pay for and receive products. The partnership also complements H‑E‑B’s brick‑and‑mortar operations by growing its online presence to meet customers’ evolving needs and expectations.
Founded in 2013, Favor has quickly expanded its presence to 50 cities across the state of Texas, where it is currently the best-rated home delivery service. In 2017, Favor more than doubled its footprint across the state and became the first U.S. on-demand delivery company to achieve profitability at scale.
“We could not be more excited to be part of H‑E‑B,” Bath said. “I am incredibly proud of our team’s success and the business we have built at Favor. H‑E‑B’s extensive resources, capital and retail food industry experience will enable us to further build on our momentum and significantly accelerate our growth throughout Texas.”
With Favor, H‑E‑B gains access to a best‑in‑class consumer‑facing technology and the on‑demand company’s advanced home delivery system. H‑E‑B will also leverage Favor’s data‑driven approach to capture valuable insights to deliver the best customer experience possible.
This transaction is the latest in a series of strategic investments in technology and partnerships that H‑E‑B has forged to enhance its digital and delivery offerings in Texas. Home grocery delivery is already a key pillar of its offering through HEBtoYou. H‑E‑B also already offers customers the convenience of “Curbside Pickup” at over 100 stores, a service that enables customers to order online and have their groceries delivered right to their cars, and HEB.com offers customers the ability to order and ship grocery, drugstore and general merchandise products to 48 states and military bases worldwide.