Rite Aid calls off Albertsons deal

The planned merger between Albertsons and Rite Aid was called off earlier this month due to concerns that the drug store chain's investors wouldn't approve the deal. At issue was the $24 billion price, which many of the stockholders and third party advisory firms felt was insufficient.

The deal was originally announced in February and was approved by both companies' boards. As per the plan, Albertsons would get on the New York Stock Exchange through an acquisition of Rite Aid's publicly traded shares.

Albertsons had sought to go public for several years, in part to address high levels of debt. In addition, Albertsons saw the Rite Aid deal as a way to more than double the number of stores it operated, and benefit from the ongoing convergence of the food and wellness fields.

For Rite Aid, its the third time a deal to sell the company has fallen though. A planned acquisition by Walgreens was trimmed back considerably in 2016 by federal regulators, and so was a plan for Fred's to acquire Rite Aid stores that Walgreen's wouldn't buy.

Vote set for Albertsons - Rite Aid deal

Rite Aid has set a special stockholders meeting for August 9 to vote on a proposal to approve its merger with Albertsons, even as some investors are trying to stop the deal.

Rite Aid has repeatedly stated that the deal is in the best interest of its shareholders. However, some investors have been upset that senior Rite Aid executives will be paid retention bonuses even if the deal falls through. Others expressed frustration that Rite Aid isn't getting a higher price, especially as pharmacy managers are an acquisition target and shareholders see value in Rite Aid's pharmacy benefit management company, EnvisionRXOptions, which has been growing rapidly.

The combination of Albertsons and Rite Aid, which operates RediClinic, would create a company with 319 retail health clinics and 4,345 pharmacies. Rite Aid executives expect the combined company to have a differentiated brand in the U.S. that combines "food, health and wellness."

Rite Aid transfers 1,651 stores to Walgreens

Rite Aid announced last month that it has transferred 1,651 stores to Walgreens. In all, Walgreens is buying 1,932 stores and three distribution centers from Rite Aid for about $4.4 billion in cash. The transfer of the remaining stores to Walgreens will take place this spring.

The remaining 2,500+ Rite Aid stores are being sold to Albertsons in a deal that will leave Rite Aid shareholders with ownership of 28% - 30% of the combined company. The yet-to-be-named combined company will trade publicly on the New York Stock Exchange.

Albertsons and Rite Aid announce merger; new company to have $83 billion in sales

Albertsons and Rite Aid announced yesterday that the companies plan to merge into a new publicly traded entity with an estimated $83 billion in annual sales. It is expected that the deal will close during the second half of the calendar year.

Here are some of the details of the planned merger:

• Albertsons' private food label products will be sold in Rite Aid stores, and most Albertsons pharmacies will be rebranded as Rite Aid.
• The new company will operate about 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington D.C. It will service more than 40 million customers per week.
• The name of the company has not been determined, but it will have dual headquarters - Albertsons' current home in Boise, ID, and Rite Aid's current home in Camp Hill, PA.
• Rite Aid's John Standley will become CEO of the combined company, and Albertsons' Bob Miller will serve as Chairman.
• The company says it is too soon to determine if any overlapping stores will close. In the Greater Philadelphia market, both Albertsons (Acme Markets) and Rite Aid have a strong presence.
• According to Burt Flickinger III, managing director at the Strategic Research Group, "(Rite Aid) will get Albertsons distribution power and they both have good distribution centers. It is a strategic triumph for Albertsons, and whereas Kroger is selling off assets like convenience stores, Albertsons is profitably growing and making strategic acquisitions."
• In exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either one share of Albertsons Companies stock plus $1.83 in cash, or 1.079 shares of Albertsons Companies stock. Depending on the result of the election, Rite Aid shareholders will own a 28% - 30% stake in the combined company.
• Walgreens and Rite Aid planned to merge last year, but the deal encountered resistance from the FTC and fell apart. Shortly thereafter, Walgreens agreed to acquire 1,932 Rite Aid stores and select distribution centers. According to Bloomberg, the newly formed company will have fewer pharmacy counters than Rite Aid did before it agreed to sell the stores to Walgreens. 

Fred's to buy 865 stores from Walgreen's and Rite Aid

Walgreen's and Rite Aid announced earlier this week that they have agreed to sell 865 stores to Fred's for $950 million in order to alleviate any antitrust concerns related to their pending merger. Kroger had been rumored as the leading candidate to purchase the stores.

Currently Fred's has 581 stores, most of which are in the Southeast. Although the locations of the 856 stores won't be revealed until the Federal Trade Commission approves the merger between Walgreen's and Rite Aid, the two companies said the stores to be sold would be located in the South, as well as the East and West coasts. If the deal goes through, Fred's would become the third largest drugstore chain in the U.S.

Kroger may look to buy part of Rite Aid portfolio

The Cincinnati Business Courier reported on Monday that Kroger could be a prime bidder for some Rite Aid or Walgreens drug stores that will need to be sold when the two companies complete their merger later this year. Kroger was rumored to be interested in purchasing Rite Aid before the chain reached a deal with Walgreens.

Industry experts say that about 500 of Rite Aid's 4,600 stores will need to be sold.

Kroger, the nation's largest operator of traditional supermarkets, is also the nation's fifth largest pharmacy operator with 2,200 in-store locations. Leon Loewenstine, an investment strategist with RiverPoint Capital Management, believes such a deal would only make sense if Kroger planned to keep running any acquired drug stores, where they could keep using the chain's customer loyalty cards. Loewenstine compared the idea to Kroger's launch of stand-alone gas stations, which supplement their gas stations at Kroger supermarket locations.

"It would be a new venture, a new avenue of growth for the company," said Loewenstine. "They could compete with Walgreens and CVS. If anybody can do it, it would be Kroger."

ShopRite, Giant dominate Delaware Valley and Philadelphia market share

The annual Market Study issue, published by Jeff Metzger and friends at Food Trade News, came out last week and reported that ShopRite remained the supermarket leader in the 15-county Delaware Valley market, while Giant took over as the leader in the eight-county Philadelphia market.

"Other merchants may have opened more stores, made acretive acquisitions or achieved higher identical store sales gains," said the authors of the study in describing ShopRite's success, "but on the whole, nobody continued to protect market share, open new stores and have significant same store increases like the member/owners of Wakefern/ShopRite once again did."

Here is the list of Delaware Valley supermarket leaders*, as ranked by market share.

1. ShopRite/PriceRite - 30.08% market share
2. Giant/Carlisle - 21.74%
3. Acme Markets - 19.77%
4. A&P (Pathmark, Super Fresh, Food Basics) - 9.22%
5. Wegmans - 4.72%
6. Save-A-Lot - 3.43%
7. Whole Foods - 3.23%
8. Thriftway/Shop 'n Bag - 2.62%
9. Redner's Markets - 2.57%
10. Bottom Dollar Food (Food Lion) - 2.08%

It's interesting to note that Wegmans earned it's 4.72% share with only 8 stores, and Whole Foods earned its 3.23% share with 10 stores. In comparison, ShopRite/PriceRite has 69 stores in the market, Giant has 62, Acme has 91 and A&P has 48.

The Philadelphia market share leaders* are as follows (the market consists of Bucks, Montgomery, Chester, Delaware and Philadelphia Counties in PA, and Burlington, Camden and Gloucester Counties in NJ):

1. Giant/Carlisle - 27.88% market share
2. ShopRite/PriceRite - 23.52%
3. Acme Markets - 18.25%
4. A&P (Pathmark, Super Fresh, Food Basics) - 9.31%
5. Wegmans - 5.31%
6. Whole Foods - 3.65%
7. Save-A-Lot - 3.45%
8. Redner's Markets - 3.29%
9. Thriftway/Shop 'n Bag - 2.41%
10. Bottom Dollar Food - 2.27%

As for the retailers that have struggled over the past several years, the authors said "there was no relief in sight as the economy continued to be listless, competition remained fierce, shopper loyalty diminished and consumers in all economic strata maintained the mindset of thrift and caution."

* The lists above do not include supercenters (Walmart, Target), club stores (Costco, BJ's), drug stores, dollar stores or convenience stores. When including all retailers that sell groceries, Wawa's market share is higher than everyone else's except ShopRite and Giant in both the Delaware Valley and Philadelphia markets. Walmart, CVS and Rite Aid also fare well (top 10), and BJ's is the dominant club store in both markets.

For more detailed information, including sales numbers, lists by county and more, visit best-met.com.

Weis Markets targeting Bedminster, PA for new store; to spend $135 million on CapEx this year

Last week Weis Markets presented its plans to the Bedminster Township planning commission for a 63,000 square foot supermarket and adjacent gas station at the corner of Routes 113 and 313 in Bucks County, not far from Doylestown. Meetings with the Board of Supervisors and the town's municipal authority are planned for the coming months.

Township officials have been hoping for some form of new construction at the site that would result in road improvements paid for by the developer. Rite Aid had received approvals to build on the site, but abandoned its plans.

In related news, Weis announced that it would invest $135 million this year towards 37 major projects, including four new stores and 32 remodels. (I'm not quite sure what the 37th project is.)

Weis currently operates 164 stores in PA, NJ, MD, NY and VA.

Number of dollar stores surpasses number of drugstores in the U.S.

A new report from Colliers International says the U.S. now has more dollar stores than drugstores. The four big national dollar store chains - Dollar General, Dollar Tree, Family Dollar and 99 Cents Only - have approximately 21,500 locations. The three big drugstore chains - Walgreens, CVS and Rite Aid - have approximately 19,700 locations.

According to the report, the recession led consumers to dollar stores instead of drugstores and supermarkets. In addition, dollar stores are often willing to go in small markets, where a big supermarket or drug store (which often has "onerous real estate requirements") may not be willing to go.

The Colliers report says all four dollar store chains are expected to continue adding stores throughout 2012.

Save-A-Lot's plans include growth and flexibility

A Supermarket News article earlier this week detailed Save-A-Lot's widely publicized plans to double their store count to 2,400 by 2015.

According to Save-A-Lot President and CEO Bill Shaner, the hard discount format is underdeveloped in the U.S., especially as compared to Europe and South America. Now is the opportunity to build market share, he says. Their stores, which average 15,000 square feet, currently have sales of about $80,000 per week.

Some interesting tidbits from the story provide good insight into Save-A-Lot's strategy:

• Save-A-Lot, a division of Supervalu (Acme), is experimenting with new opportunities to drive its expansion, including co-branded stores (with Rite Aid stores in South Carolina and a Hispanic-oriented operator in Texas) and new offerings, such as deli departments.
• The company has regionalized its real estate and development team by spreading them across the country rather than housing them entirely in St. Louis, as they had done previously. According to Shaner, this new structure provides Save-A-Lot with in-market expertise.
• According to a map of expansion opportunities on their website, Pennsylvania can expect 50-100 new Save-A-Lot stores in the next couple years, while New Jersey can expect 25-50 new stores. The biggest growth areas are California, Texas and Florida. Larger urban markets will see more corporate store openings, while smaller markets will see more licensed independent operators.

Incentives and Flexibility

• The company is supporting all licensees who open a Save-A-Lot by providing them with at least $200,000 in financing per store. They say it costs an average of $822,500 to open a new store.
• Executives have decided to be more flexible in the store's building requirements by "letting the building be the building," rather than imposing a proscribed design. General construction standards as they pertain to lighting, flooring and walls have been relaxed as well.
• A more localized product offering, including about 15% of the merchandise that can be customized to the market, has been introduced in an attempt to improve sales performance.

Here's the Supermarket News article: Thinking Outside the Small Box