Partnerships / Acquisitions

Albertsons Is Buying Rite Aid

Albertsons announced it is buying drug store chain Rite Aid so both companies can better compete with larger pharmacy chains and the looming threat of Amazon.

According to news from Reuters, the acquisition will create a company with $83 billion in annual revenue.

Albertsons will be converting its existing pharmacies to Rite Aid stores, while current Rite Aid locations will operate as standalone pharmacies. Together, the company will operate around 4,350 pharmacy counters and 320 clinics across 38 states and Washington.

“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 and Rite Aid said in a joint statement.

After the announcement, Rite Aid shares surged by as much as 25 percent pre-market on Tuesday and were up 2.3 percent in afternoon trading.

The deal will help both retailers face off against larger retailers like CVS and Walgreens, as well as Amazon. The eCommerce giant not only acquired supermarket chain Whole Foods last year, but it also recently announced it was teaming up with Berkshire Hathaway and JPMorgan Chase to form a not-for-profit company to provide healthcare for their employees.

In addition, CVS recently acquired insurer Aetna for $66 billion, while Walgreens is reportedly taking over drug distributor AmerisourceBergen.

“Drug retailing has had its own challenges with reimbursement pressure and weak front-end sales as evidenced in Rite Aid’s weak profits over the last couple of years,” said Mickey Chadha, a vice president with credit ratings agency Moody’s. “Competing with much larger and more diversified drug retailers like CVS and Walgreens will be a formidable challenge.”

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