Retail News Breaks
Jean Coutu to sell off part of Rite Aid stake
July 5th, 2011
LONGUEUIL, Quebec – The Jean Coutu Group plans to sell approximately 10% of its equity interest in Rite Aid Corp.
The Quebec-based pharmacy operator, Rite Aid's biggest shareholder, said Tuesday that it has filed a notice confirming its intent to dispose of about 25 million of its nearly 252 million common shares of the U.S. drug store chain.
"The Jean Coutu Group, along with its representatives on the board of directors of Rite Aid, remain supportive of the turnaround plan being executed by Rite Aid's management," Jean Coutu stated in reporting its fiscal 2012 first-quarter results. "The corporation decided to monetize a portion of this investment, although we currently intend to remain the largest shareholder of Rite Aid."
Jean Coutu reported Tuesday that for its 2012 first quarter ended May 28, the company's unrecognized share of loss in Rite Aid totaled $16.2 million. In late April, the Canadian drug chain said that for its 2011 fiscal year ended Feb. 26, its total unrecognized share of loss in Rite Aid was $250 million.
During the fiscal year ended Feb. 28, 2010, Jean Coutu's share of loss in Rite Aid exceeded the carrying value of its investment and, as required by Canadian GAAP, the company reduced the carrying value of its investment to zero and ceased recording its share of loss in Rite Aid higher than the carrying value.
Jean Coutu acquired a 32% common equity stake in Rite Aid through a $3.4 billion deal announced in August 2006, in which it sold Rite Aid its U.S. retail pharmacy subsidiary, including more than 1,850 Brooks and Eckerd drug stores. Under the agreement, Jean Coutu received received $2.36 billion in cash, subject to a working capital adjustment, and 250 million shares of Rite Aid common stock, which gave it 30.2% of the voting power in Rite Aid. The deal closed in June 2007.
As of late afternoon trading Tuesday, Jean Coutu shares were up 24 cents, or 2.15%, to $11.39 (Canadian). Rite Aid shares were down 6 cents, or 4.1%, to $1.29 (U.S.).
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