Rite Aid agrees to buy Eckerd and Brooks

[DCMetroRaleigh]

HARRISBURG, Pa. - Rite Aid Corp., the nation's third largest drugstore chain, said Thursday it will purchase the U.S. Eckerd and Brooks operations of Canada's Jean Coutu Group Inc. for about $2.55 billion in cash and stock.

The deal, Rite Aid's first major acquisition since a turnaround team arrived to bring the company back from the brink of bankruptcy six years ago, will make it the largest drugstore chain operator on the East Coast and give it a larger presence in major cities such as Atlanta Philadelphia, New York and Baltimore, Rite Aid said.

But it will still trail Walgreen and CVS nationally.

"With this larger scale, we'll be able to compete more effectively in a very competitive business," Rite Aid president and CEO Mary Sammons told analysts in a conference call. "And we'll be in a stronger position to take advantage of the growth expected in our industry, with more people taking more prescriptions, a wave of new generics coming to market, the new Medicare prescription plan for seniors, and customers becoming more health conscious."

Rite Aid will pay $1.45 billion in cash and 250 million shares valued at about $1.1 billion. The shares will give Jean Coutu a 32 percent equity stake and 30.2 percent voting power in the expanded Rite Aid, making it the company's largest shareholder. In addition, Rite Aid will assume $850 million of long-term debt as part of the deal.

In the first year, Rite Aid plans to spend $500 million on the stores it is buying to remodel, remerchandise and convert their computer systems and signage to Rite Aid's, and add another $450 million in the following four years, Sammons said.

"Every store will be touched in that first year, and some to a greater degree than others," she said.

Neil Stern, a drugstore analyst and senior partner with Chicago-based retail consulting firm, McMillan Doolittle LLP, said Rite Aid needed to make the purchase if it expected to keep up with the rapidly expanding CVS and Walgreen.

He also said the deal also builds on Rite Aid's strong markets in the Northeast.

"I think they clearly have the organizational strength to do this, and I think they have the financial wherewithal, assuming they get the support from Wall Street," Stern said.

Rite Aid shares fell 19 cents, or 4.1 percent, to $4.49 in afternoon morning trading on the New York Stock Exchange.

Jean Coutu paid $2.38 billion for 1,539 Eckerd stores sold in 2004 by the retailer J.C. Penney Co.

The Rite Aid purchase has been approved by both companies' boards, but still requires a review by antitrust regulators and the approval of Rite Aid shareholders.

In the conference call, Lehman Brothers analyst Meredith Adler questioned whether the deal would pass muster with antitrust regulators because of the "significant overlap" in the location of the companies' stores.

Sammons would not speculate on how the proposed deal might fare with regulators. She also said that it was too early to say whether Rite Aid would close any stores until it does an analysis.

The planned acquisition includes 1,858 drugstores

[NCMike1981]

Wasn't Rite Aid in NC until the mid '90's or so? I think the last one in Durham hung on off of Hillsborough Rd next to a Byrds/Lowes Foods until maybe '96....wow Eckerds may disappear, wierd. I hope Kerr Drug sticks around, I'm actually suprised they haven't been taken over yet...

[ScottCLT]

Wasn't Rite Aid in NC until the mid '90's or so? I think the last one in Durham hung on off of Hillsborough Rd next to a Byrds/Lowes Foods until maybe '96....wow Eckerds may disappear, wierd. I hope Kerr Drug sticks around, I'm actually suprised they haven't been taken over yet...

Yes, they were in NC. I grew up in Hickory, and the nearest drugstore to my house was a Rite-Aid until it changed to a CVS probably around '95.

It is weird to think of seeing no more Eckard's in town

[GSP Tiger]

Was Rite Aid and Eckerd both owned by JCPenney some years ago? There was some regionalizing some time ago where most Eckerd locations in NC became Rite Aid and most Rid Aid locations in SC became Eckerd.

It is sad to see Eckerd go. It has succeeded as a regional chain in several southeastern United States, but struggles to develop nationally. As Rite Aid and Eckerd become one, CVS and Walgreen's have a strong competitor.

Does anyone see a major supermarket chain and a major drug store chain becoming one some day soon?

[otherstream]

Was Rite Aid and Eckerd both owned by JCPenney some years ago? There was some regionalizing some time ago where most Eckerd locations in NC became Rite Aid and most Rid Aid locations in SC became Eckerd.

It is sad to see Eckerd go. It has succeeded as a regional chain in several southeastern United States, but struggles to develop nationally. As Rite Aid and Eckerd become one, CVS and Walgreen's have a strong competitor.

Does anyone see a major supermarket chain and a major drug store chain becoming one some day soon?

Eckerd was owned by JCPenney until several years ago. Rite Aid wasn't.

I'm not sure about the big switch you mention. While the two chains may have traded a few locations in some areas at some point, most of the Eckerd stores from my childhood in Greensboro in the 1970s (and even in Charlotte in the 1980s) are still Eckerd stores today, although several have relocated to ourparcels in their same shopping centers. The ones that closed did so because their neighborhoods or shopping centers were dying (East Independence or Charlottetown in Charlotte, etc.) I do know, though, that there were some trade-offs (probably antitrust-related) when CVS purchased Revco a while back.

Actually, in just the past few months, one of the three biggest supermarket chains in the country, Albertsons, was mostly stripped of its large regional drugstore chains, Osco and Sav-on (no relation to Kroger Sav-on), which were sold to CVS. Kroger used to own its own chain as well, called SuperX, which had locations in NC in the 1970s. So there's already precedent for a major supermarket chain owning a major phramacy chain.

[Neo]

I know this topic is a bit old but I noticed that permits are now coming through for signage to convert Eckerd's to Rite Aid's. I suspect we'll see the Eckerd signage disappear in the area over the course of the next few weeks. It will definately take some getting used to.

[DigitalSky]

I know this topic is a bit old but I noticed that permits are now coming through for signage to convert Eckerd's to Rite Aid's. I suspect we'll see the Eckerd signage disappear in the area over the course of the next few weeks. It will definately take some getting used to.

[New Name]

Absoluetely, considering how many Eckerxds per capita we do have

[Neo]

I know a manager at Eckerds, and they don't even know when the switch will happen, although he says more like late summer.

Is it possible that they are doing the conversion by county? The permits have been applied for in Cabarrus County, not sure about Mecklenburg.

[New Name]

Is it possible that they are doing the conversion by county? The permits have been applied for in Cabarrus County, not sure about Mecklenburg.

[DigitalSky]

http://www.charlotte.com/122/story/119910.html there is a story today talking about the Eckerd signs disappearing, and the whole history of the stores and takeovers and transactions that've occured over past years

[Raintree21]

Everything is going full circle. I remember going to the RiteAid at Old Towne Village Shopping Center at Carmel and Quail Hollow Roads growing up until their store was bought out.

[New Name]

Now the Eckerd managers are saying June 8 is the date. Although it may be a phased conversion still in some areas.

[DigitalSky]

Now the Eckerd managers are saying June 8 is the date. Although it may be a phased conversion still in some areas.