Albertsons/Rite Aid Merger is off: What's next

wnetmacman
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Albertsons/Rite Aid Merger is off: What's next

Post by wnetmacman » August 10th, 2018, 8:27 am

pseudo3d wrote:
August 10th, 2018, 6:33 am
What I meant was mostly deals in the West Coast, like Albertsons taking over side-by-side Rite Aid locations, or Albertsons selling excess stores to Rite Aid (mostly acquired in the Haggen deal, though there are a few East Coast stores I can imagine that too). Not like expanding to Michigan or something like that.
Without Albertsons, Rite Aid is most likely doomed. The stores they kept were either ones they couldn't unload or stores in the core regions. There would be too much competition in those core regions from CVS and Walgreens to sell anything left to them. I wonder if Fred's is still interested....
pseudo3d wrote:
August 10th, 2018, 6:33 am
There wouldn't be much left of Albertsons/Safeway unfortunately, and the other markets are too small to get a chunk out of. Houston is a market in particular that isn't doing much but won't do much good to sell, with a lot of the valuable properties already closed or sold (LLC did a number on their divisions they owned). Spinning off the manufacturing arm I imagine would be the next step if things are going that way. As for debt, I believe they took on a bunch of debt to buy Rite Aid, and since it's not happening, they need to pay that back pronto.


The manufacturing arm is another of the so-called crown jewels. Selling it would reduce the value of the company in an IPO, and I don't see that happening.

The vast majority of the debt they were going to take on to purchase Rite Aid should be offset by any penalties, since it was Rite Aid who terminated the agreement. Unless, of course, Albertsons forgot about that....

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Albertsons/Rite Aid Merger is off: What's next

Post by Brian Lutz » August 10th, 2018, 8:54 am

From what I read about the cancellation, there were no penalties involved on either side.

I do think there's some potential for CVS to take over some of the Northwest Rite Aid stores, as CVS has a rather low store count in the region and is still a relative newcomer to the area.

And yes, Rite Aid has been slow to remodel older stores but has picked up the pace in recent years. I can name a number of Rite Aid stores that still had Pay 'n Save decor in them for several years after they were taken over from Payless.

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Albertsons/Rite Aid Merger is off: What's next

Post by Super S » August 10th, 2018, 9:08 am

Brian Lutz wrote:
August 10th, 2018, 8:54 am
From what I read about the cancellation, there were no penalties involved on either side.

I do think there's some potential for CVS to take over some of the Northwest Rite Aid stores, as CVS has a rather low store count in the region and is still a relative newcomer to the area.

And yes, Rite Aid has been slow to remodel older stores but has picked up the pace in recent years. I can name a number of Rite Aid stores that still had Pay 'n Save decor in them for several years after they were taken over from Payless.
I think Rite Aid is taking note of CVS starting to pop up in the Northwest (although at this point they mostly are a Pharmacy inside Target) which is why some remodels are taking place now. Rite Aid at least is now an established brand, but they got off to a rocky start when they took over PayLess.

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Albertsons/Rite Aid Merger is off: What's next

Post by babs » August 10th, 2018, 1:19 pm

Super S wrote:
August 10th, 2018, 9:08 am
Brian Lutz wrote:
August 10th, 2018, 8:54 am
From what I read about the cancellation, there were no penalties involved on either side.

I do think there's some potential for CVS to take over some of the Northwest Rite Aid stores, as CVS has a rather low store count in the region and is still a relative newcomer to the area.

And yes, Rite Aid has been slow to remodel older stores but has picked up the pace in recent years. I can name a number of Rite Aid stores that still had Pay 'n Save decor in them for several years after they were taken over from Payless.
I think Rite Aid is taking note of CVS starting to pop up in the Northwest (although at this point they mostly are a Pharmacy inside Target) which is why some remodels are taking place now. Rite Aid at least is now an established brand, but they got off to a rocky start when they took over PayLess.
I could see CVS being interested in the Northwest stores but not the rest of the chain. The problem is that if Rite Aid sells the NW stores for about the same price (`$4 million?) as they sold stores to Walgreens, what happens to the rest of the chain? Who buys the California stores? What about the others? There aren't that many options left out there and no I don't see a beleaguered Fred's jumping back in. And No, Amazon is not getting into the retail drug store space.

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Albertsons/Rite Aid Merger is off: What's next

Post by pseudo3d » August 10th, 2018, 4:58 pm

wnetmacman wrote:
August 10th, 2018, 8:27 am
Without Albertsons, Rite Aid is most likely doomed. The stores they kept were either ones they couldn't unload or stores in the core regions. There would be too much competition in those core regions from CVS and Walgreens to sell anything left to them. I wonder if Fred's is still interested....
Storewanderer postulated that Albertsons was trying to speed through the acquisition before Walgreens finished the takeover and the remaining Rite Aid company could take flight again. The question is what Albertsons does with the extra money it has taken on, if they're scrambling for another company. I can't see another retailer that would really be able to help them (and even Rite Aid wasn't that company)--I kind of tossed around the idea of them buying SHLD, but that of course takes on even more debt and a bunch of loser stores, and any idea of them having a better non-food line-up because of that is washed out. SuperValu would've been a good choice had UNFI had not just sniped them, because even if Albertsons worked out a deal to buy SuperValu and then sell UNFI the distribution components that they wanted (it might make a more attractive deal since UNFI wouldn't have to worry about Cub Foods or the other grocery stores), shareholders wouldn't be happy with that. Now if UNFI walked and Albertsons swooped in with a comparable deal (or at least made it appear that way), Albertsons could be seen as the white knight, and Albertsons gets the listing, gets Cub Foods, might even get some of their old brands back, then sells certain assets to UNFI, and everything works out.

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Albertsons/Rite Aid Merger is off: What's next

Post by klkla » August 10th, 2018, 7:46 pm

pseudo3d wrote:
August 10th, 2018, 4:58 pm
The question is what Albertsons does with the extra money it has taken on
How much actual debt has Albertson's added for this transaction?

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Re: Albertsons to buy (what's left of) RiteAid

Post by pseudo3d » August 10th, 2018, 7:49 pm

klkla wrote:
August 10th, 2018, 7:46 pm
pseudo3d wrote:
August 10th, 2018, 4:58 pm
The question is what Albertsons does with the extra money it has taken on
How much actual debt has Albertson's added for this transaction?
I thought I read an article where they did add debt but I can't find it now.

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Albertsons/Rite Aid Merger is off: What's next

Post by storewanderer » August 11th, 2018, 12:03 am

klkla wrote:
August 10th, 2018, 7:46 pm
pseudo3d wrote:
August 10th, 2018, 4:58 pm
The question is what Albertsons does with the extra money it has taken on
How much actual debt has Albertson's added for this transaction?
This would be that article. It was not clear if this debt was added for the merger. https://www.reuters.com/article/brief-a ... SFWN1SG1M9

Don't forget the millions they got from selling 71 store properties and doing leasebacks in 2017 too...

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Albertsons/Rite Aid Merger is off: What's next

Post by storewanderer » August 11th, 2018, 12:05 am

pseudo3d wrote:
August 10th, 2018, 4:58 pm
wnetmacman wrote:
August 10th, 2018, 8:27 am
Without Albertsons, Rite Aid is most likely doomed. The stores they kept were either ones they couldn't unload or stores in the core regions. There would be too much competition in those core regions from CVS and Walgreens to sell anything left to them. I wonder if Fred's is still interested....
Storewanderer postulated that Albertsons was trying to speed through the acquisition before Walgreens finished the takeover and the remaining Rite Aid company could take flight again. The question is what Albertsons does with the extra money it has taken on, if they're scrambling for another company. I can't see another retailer that would really be able to help them (and even Rite Aid wasn't that company)--I kind of tossed around the idea of them buying SHLD, but that of course takes on even more debt and a bunch of loser stores, and any idea of them having a better non-food line-up because of that is washed out. SuperValu would've been a good choice had UNFI had not just sniped them, because even if Albertsons worked out a deal to buy SuperValu and then sell UNFI the distribution components that they wanted (it might make a more attractive deal since UNFI wouldn't have to worry about Cub Foods or the other grocery stores), shareholders wouldn't be happy with that. Now if UNFI walked and Albertsons swooped in with a comparable deal (or at least made it appear that way), Albertsons could be seen as the white knight, and Albertsons gets the listing, gets Cub Foods, might even get some of their old brands back, then sells certain assets to UNFI, and everything works out.
Albertsons does not have the money to buy Supervalu. They were basically trying to take Rite Aid over for next to nothing and that is why the deal was rejected. Albertsons financial position is not good. They have extremely high debt and are operating in a manner that is hindered due to the high debt. Albertsons can't really afford to buy anything that costs much of anything.

Maybe Albertsons can go reverse merger with Fred's or Smart and Final.

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Albertsons/Rite Aid Merger is off: What's next

Post by storewanderer » August 11th, 2018, 12:09 am

babs wrote:
August 10th, 2018, 1:19 pm
Super S wrote:
August 10th, 2018, 9:08 am
Brian Lutz wrote:
August 10th, 2018, 8:54 am
From what I read about the cancellation, there were no penalties involved on either side.

I do think there's some potential for CVS to take over some of the Northwest Rite Aid stores, as CVS has a rather low store count in the region and is still a relative newcomer to the area.

And yes, Rite Aid has been slow to remodel older stores but has picked up the pace in recent years. I can name a number of Rite Aid stores that still had Pay 'n Save decor in them for several years after they were taken over from Payless.
I think Rite Aid is taking note of CVS starting to pop up in the Northwest (although at this point they mostly are a Pharmacy inside Target) which is why some remodels are taking place now. Rite Aid at least is now an established brand, but they got off to a rocky start when they took over PayLess.
I could see CVS being interested in the Northwest stores but not the rest of the chain. The problem is that if Rite Aid sells the NW stores for about the same price (`$4 million?) as they sold stores to Walgreens, what happens to the rest of the chain? Who buys the California stores? What about the others? There aren't that many options left out there and no I don't see a beleaguered Fred's jumping back in. And No, Amazon is not getting into the retail drug store space.
I think the California Stores are the most valuable piece of Rite Aid. I also think the Pacific Northwest Stores are OK performers but not as good as California. Not sure if the MI or PA Stores are somehow great performers (kind of doubt it) but those are the two other large markets left.

Rite Aid just needs to focus. They need management (be it the current one, or new management) who will actually focus on trying to operate Rite Aid and not sell it. Given all that company has had happen between the accounting problems in the 90's, the crooked accounting, the horribly botched acquisitions, always the worst financial performance of the drug chains, it is amazing they are even still in business today. The fact that they are even still in business today shows that there is some pretty significant strength in pockets of their store base. Looking solely at the California operation, Rite Aid is a much better drugstore operator than CVS or Walgreens. They have better assortment, better pricing, and better service in the stores. But I've been to some pretty dire Rite Aids down in the South, back in the east, and in Utah.

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