Fred’s remains optimistic

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MEMPHIS — The overhaul of Fred’s Inc. will continue despite the collapse of its pending purchase of 865 stores in connection with the now abandoned Walgreens-Rite Aid merger, the regional chain said yesterday.

“While the acquisition of additional stores was an opportunity for growth, we always viewed it as a potential outcome that would accelerate our transformation, not define it,” said Fred’s chief executive officer Michael Bloom. “This is a disappointing outcome; however, the termination of the transaction has no impact on the company’s transformation strategy or our ability to execute. We are as confident as ever that we have a strong team and the right strategy in place to drive long-term growth and profitability, and to enhance value for our shareholders. We are excited about what we have accomplished and are optimistic about the future.”

Walgreens Boots Alliance Inc. yesterday scrapped its plans to buy Rite Aid in its entirety and sell stores to Fred’s. It has opted instead to purchase 2,186 Rite Aid stores —a little less than half of the number operated by the Pennsylvania-based chain. The new deal supersedes the agreement to divest certain stores to Fred’s that was announced in December. Fred’s will receive $25 million for expenses associated with the terminated transaction.

Bloom added, “Our leadership team continues to deliver on its promise to optimize our business model and execute our health care strategy. We are capitalizing on opportunities to increase prescription comps in retail pharmacy, growing sales in specialty pharmacy and driving traffic into our front store. We also continue to optimize our store fleet, upgrade our talent, technology, supply chain and business processes. Our transformation is on track.”

A day before the merger’s collapse, Fred’s announced that its board had adopted a short-term shareholder rights plan amid “increased trading activity” related to its involvement in the deal.

The company said the plan would reduce the probability of any entity gaining control of it through open market purchases, and did not come in response to any specific takeover bid or other proposal to acquire control. The plan, also known as a “poison pill,” has a trigger of 10% and expires on Sept. 25.



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