Albertsons to Buy Rite Aid in Move to Compete With Amazon

Albertsons to Buy Rite Aid in Move to Compete With Amazon
From TIME - February 20, 2018

Grocer Albertsons Cos. will buy drugstore chain Rite Aid Corp. in a deal that would accelerate the remaking of the U.S. retail and health-care industries.

The takeover serves several purposes. Rite Aid will get a buyer after a failed merger with another chain last year. Albertsons will add new locations and size amid increasing pressure from online competitors. And the grocers private-equity owners will exit their 2013 investment without having to go through an initial public offering in a turbulent market.

The combined companies will have about 4,900 stores, including 4,350 pharmacy locations, in 38 states, they said in a statement. The Albertsons pharmacies will be rebranded under the Rite Aid name.

Retailers have been under growing pressure from online competitors like Inc., and the corner drugstore has been no exception. While the prescription drug businesses at pharmacies has been relatively stable, front-of-the-store sales have been in decline. Giant retailers like Walmart Inc. are also looking to play a bigger role.

The result has been consolidation.

CVS Health Corp. agreed last year to pay about $68 billion for health insurer Aetna Inc., while the Wall Street Journal recently reported that Walgreens Boots Alliance Inc. is in early talks to buy drug distributor AmerisourceBergen Corp. after its takeover of Rite Aid was scaled back last year for antitrust reasons.

Online Threat

The deals demonstrate some of the threats (declining reimbursement, Amazon, etc.) that drug retailers have found themselves under and each of the large public players appears to be trying to solve this issue in a different way, said Ross Muken, an analyst with Evercore ISI.



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