U.S. grocery chain Albertsons plans to buy the portion of Rite Aid Corp. that is not being sold to drugstore giant Walgreens Boots Alliance Inc. in a bid to adapt to the rapidly changing consumer landscape.
Privately held Albertsons plans to merge with publicly traded Rite Aid to form a company worth about $24 billion, including debt, and revenues of $83 billion, according to The Wall Street Journal.
Albertsons will issue 1 share plus $1.83 in cash, or a further 1.079 of its stock, for every 10 units of Rite Aid stock it acquires.
Rite Aid shareholders will own about 28% to 29.6% of the combined company depending on the results of cash elections.
Albertsons shareholders will own a 70.4% to 72% stake in the combined company, whose portfolio would include about 4,900 stores and 4,300 pharmacies across 38 states and Washington, D.C., with a concentration skewed to the coasts.
The new group would have Rite Aid CEO John Standley as its chief executive and Albertsons CEO Bob Miller as chairman.
The new company's board will consist of nine directors. Albertsons and Rite Aid will each nominate four directors and jointly select one.
The company's new name is to be decided upon deal completion, which is expected in early second half of 2018.
Rite Aid is valued at about $2.3 billion, with thousands of drug stores and a benefits-management firm serving millions of members. The company is in the process of transferring 1,932 stores, three distribution centers and related inventory to Walgreens for $4.38 billion.
For Albertsons, which owns Safeway and 19 other supermarket chains, the transaction would allow it to go public. Albertsons is backed by an investment consortium led by Cerberus Capital Management LP, which also includes Kimco Realty Corp.
The merger is also "the best way" for the two groups to "compete in businesses increasingly threatened by Amazon.com Inc., along with an emboldened Walmart Inc.," the Journal said, citing the chief executives of both companies in interviews.
Amazon is pushing into the food retail sector through the acquisition of Whole Foods Market Inc., while Walmart has boosted its e-commerce offerings and product ranges, the Journal noted.
Albertsons and Rite Aid expect the merger to boost their food and pharmacy delivery options for customers, driving repeat sales.