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Albertsons Companies and Rite Aid Corporation announced what they called “a definitive merger agreement under which privately held Albertsons Companies will merge with publicly traded Rite Aid.” Once Albertsons acquires Rite Aid, the combined companies will have an estimated value of $24 billion.

The new company “will operate approximately 4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington, D.C., serving 40+ million customers per week,” the announcement says. “Most Albertsons Companies pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid stand-alone pharmacies … The new company will have an expanded footprint and be ranked first or second in 66 percent of the top metropolitan areas in the United States and will be ranked first or second in 70 percent of pharmacy locations.”

Albertsons owned by an investment consortium led by Cerberus Capital Management, along with Kimco Realty Corporation, Klaff Realty, Lubert-Adler Partners, and Schottenstein Stores Corporation. The agreement says that 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 common stock plus approximately $1.83 in cash or 1.079 shares of Albertsons Companies stock.

The announcement goes on to say that Rite Aid Chairman/CEO John Standley will become CEO of the combined company, with current Albertsons Companies Chairman/CEO Bob Miller serving as Chairman: “The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pennsylvania. The name of the combined company will be determined by transaction close.”

CNBC notes that “this deal follows Rite Aid's failed attempt in 2015 to sell to its 4,600 stores to Walgreens. That deal was whittled down by regulators to a purchase of 1,932 stores for $4.37 billion.”
KC's View:
We’ll know more about this deal as time goes on, but here’s my initial reaction…

This will certainly give the merged companies a degree of physical ubiquity, probably a ton of cost savings, and the ability to trade on an increased connection between food and health.

But it seems to me that at least in the initial announcement, this is all about having more walls and buildings. I think that real traction in the future will lie with the company’s ability to see beyond walls and buildings, and figure out how to become increasingly relevant to their customers’ lives, with a highly defined value proposition.

Quite simply, it cannot be just about being bigger. They have to be better … and figure out what “better” means to a changing consumer population and especially to the consumer of the future.