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The Wall Street Journal this morning reports that “some Rite Aid Corp. shareholders plan to oppose a merger with grocer Albertsons Cos. that they believe undervalues the struggling pharmacy chain.”

According to the story, “Rite Aid investors who oppose the approximately $24 billion deal say they aren’t getting a big enough share of the company that would be formed by the combination. These investors say Rite Aid would be better off overhauling its pharmacies on its own … Critics of the deal also say executives at the two companies are too close, noting that Albertsons Chief Executive Bob Miller previously served on Rite Aid’s board.”

The Journal writes that “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.  Under the deal, Rite Aid investors may exchange 10 of their shares for a share in the combined company plus $1.83 in cash, or alternatively 10 shares for 1.079 new shares. They would own about 30% of the new business.”

However, Rite Aid CEO John Standley says that the deal “makes sense for us strategically and financially. The merger will transform Rite Aid.” And Loren Trimble, CEO of AArete, a management consulting firm, tells the Journal that “both companies are getting squeezed. If they do nothing, it’s a death sentence for both of them.”

The story notes that “closely held Albertsons hasn’t faced the same pushback. Its largest investor, Cerberus Capital Management LP helped broker the deal, which would return Albertsons to a public listing after 12 years of private ownership.”
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