Faced with growing investor opposition, Cumberland County-based Rite Aid Corp. and Idaho-based supermarket chain Albertsons Cos. have called off a planned $24 billion merger.
A special shareholder vote was slated for today in New York. The companies announced the decision to scrap the merger plans Wednesday evening.
“While we believed in the merits of the combination with Albertsons, we have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a standalone company,” Rite Aid Chairman and CEO John Standley said.
The merger plan was announced in February, but it has faced a lot of opposition from shareholders who said a Rite Aid-Albertsons union was not be the right fit at the offered price, despite the added pressure on retailers to cut costs, expand their reach and differentiate themselves amid growing competition from online sales.
Glass Lewis and Institutional Shareholder Services, firms whose recommendations are followed by major mutual funds, recently recommended that shareholders oppose the merger on the basis of price. Under the proposed deal, Rite Aid shareholders stood to own about 30 percent of the new company, while shareholders of closely held Albertsons would control the remaining 70 percent.
Rite Aid officials had said merging with Albertsons was the best long-term move for Rite Aid to build its scale to get better pricing and diversify its revenue and profit streams, especially as other health care companies are tying the knot.
In a separate statement, Albertsons said it disagreed with the conclusion of certain Rite Aid stockholders and third-party advisory firms about the value of its offer.
“Consistent with Albertsons Companies’ disciplined approach to mergers and acquisitions, and after careful consideration of all information available to our board of directors through today, we were unwilling to change the terms of the merger,” the company said in a statement.
The proposed merger would have combined about 2,600 Rite Aid stores with about 2,300 stores Albertsons owns across the United States. Under the terms of the deal, neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination of the merger agreement.