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Some Rite Aid Investors Rally To Stop Albertsons Deal

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With the price of Rite Aid stock below $2 a share and a stockholder vote on a merger with Albertsons yet to be scheduled, some investors are rallying support for a late effort to get what they hope will be a better deal.

At issue is a $24 billion merger with grocery store giant Albertsons announced in February that would result in Rite Aid shareholders owning about 30% of the combined new company. The combination of Rite Aid, which operates RediClinic, and Albertsons would create a company with 319 health clinics and 4,345 pharmacies after the merger closes.

In its latest filing last Friday with the Securities and Exchange Commission, Rite Aid said the merger “is expected to close in the early part of the second half of calendar 2018.” But Rite Aid hasn’t scheduled a vote of the shareholders, which has given some opposed to the deal more time  to rally support for their positions. Take Chris Komatinsky, an individual shareholder from Los Angeles who says he and his family own about 1.5 million Rite Aid shares and want the merger stopped.

Komatinsky issued a press release this week calling for an independent investigation of the deal outlining several issues including retention bonuses cited in Friday's SEC regulatory filing that will be paid to senior executives even if the deal falls through. Komatinsky would also like to see an effort to get a better value for the company, citing what he sees as a valuable asset in Rite Aid’s pharmacy benefit manager, EnvisionRxOptions, which has been growing rapidly. And he and other investors have said they  are concerned about Albertsons' debt and therefore the future company's ability to grow, particularly at a time when retailers are facing the potential of competition from Amazon as well as Walgreens and CVS Health, which is buying Aetna, the nation's third largest health insurer.

“Small shareholders own a large percentage of Rite Aid shares but often have a difficult time getting organized to have a large enough total of shares owned to have a voice,” Komatinsky said in his release that included his contact information for other shareholders and a web site.

In April, the Wall Street Journal also reported some investors were planning to oppose the deal. In particular, the newspaper reported “one of Rite Aid’s 10 biggest shareholders, which declined to be named, said it planned to vote against the deal because it doesn’t give shareholders a fair premium.”

For its part, Rite Aid Wednesday morning said the merger with Albertsons will "deliver compelling long-term value for Rite Aid shareholders and its customers."

Rite Aid executives have said they expect the drugstore chain’s combination with grocer Albertsons to have a differentiated brand in the U.S. retail market that combines “food, health and wellness.”

With the transfer of more than 1,900 stores to Walgreens Boots Alliance completed, Rite Aid executives say they can now focus on the merger with Albertsons and growing its businesses. In particular, Rite Aid said it will continue to convert its drugstores to “wellness stores,” which have expanded clinical pharmacy services, health and wellness products.

"In the face of a consolidating and evolving marketplace, Rite Aid’s board and management team evaluated a range of strategic options with the assistance of outside advisors," Rite Aid said in its Wednesday  statement. "After conducting rigorous due diligence and engaging in extensive negotiations with Albertsons, Rite Aid, with the unanimous approval of its board, agreed to terms for the merger that it believes will provide significant value for its shareholders."

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