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Albertsons, Rite Aid unveil merger’s strategies and synergies

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New company expected to generate revenue of roughly $83 billion

BOISE, Idaho — Albertsons Cos. and Rite Aid Corp. on Tuesday hosted a joint analyst event to discuss the strategic and financial benefits of the proposed merger transaction between the two companies.

Announced in late February, the merger will join the nation’s second-largest supermarket operator with its third-largest drug chain. Overall, the company will generate pro forma revenue of roughly $83 billion and operate about 4,900 stores, 4,350 pharmacies and 320 in-store health clinics across 38 states and Washington, D.C., serving more than 40 million customers per week.

Plans call for Rite Aid chairman and chief executive officer John Standley to become chief executive officer of the merged company, with current Albertsons chairman and CEO Bob Miller serving as chairman. The company will be managed by executives from both organizations and will have dual headquarters in Boise, Idaho, and Camp Hill, Pa.

Executives said there is enough space in Albertsons  grocery stores to expand health and wellness including Rite Aid’s RediClinics  while tapping new markets for health and drug benefits, particularly for seniors insured by Medicare in California where both have strong brands.

“Once the deal is finalized, the new company will become the largest food and drug retailer with strong recognizable brands. The transaction will significantly improve scale and competitive position. It will make us the No. 1 food and drug retailer on the West Coast, with a strong position in the Northeast as well,” said Standley. “The new company will also will be strongly positioned with a local scale in highly attractive markets.” He added that the company will offer the unique opportunity to build narrow networks and drive significantly loyalty among pharmacy and grocery customers. “We will have a unique combination of pharmacy, and grocery will gives us a competitive advantage as well.”

He noted that Albertsons Cos. pharmacies will be rebranded to the Rite Aid banner once the deal is approved.

The merger will involve expanding the Rite Aid pharmacy brand into most of Albertsons groceries that include Safeway, Vons, Shaw’s and Acme among others. “There’s the potential for more opportunities,” Rite Aid chief operating officer Kermit Crawford said.

“Our plan for the new company delivers accelerated growth in revenue and profitability. We are well positioned for growth,” said Jim Donald, president and chief operating officer of Abertsons Cos. He added that growth will be further accelerated by the compelling revenue opportunities and cost synergies. “In addition, our investment in our PBM asset EnvsionRx, will further increase sales, customer count and line under coverage.”

The companies project $3.7 billion in pretax earnings for the combination’s first year and $375 million in annual cost savings by 2022. They said they plan to generate new revenue by merging rewards programs, selling Albertsons branded products in Rite Aid stores and offering more services online.

Pending approval of Rite Aid shareholders, regulatory clearance and other customary closing conditions, the transaction is expected to close early in the second half of 2018. The agreement, which will take privately held Albertsons public, has already been approved by the boards of both companies.


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