Rite Aid Corporation and Albertsons Companies will no longer pursue a merger agreement, according to their announcement the evening ahead of a shareholder vote over the deal.
The announcement is a surprise blow to both the pharmacy and the grocer, which are both currently facing tighter competitions in their respective industries. However, they were unable to structure a deal that could sufficiently impress the investors.
The $24 billion dollar merger agreement, which was announced last February, has encountered push-back from a number of retail investors, plus the top ten shareholder Highfields Capital Management.
Critics have pointed out that the deal offers Albertsons’ private equity owner, Cerberus Capital Management, a way to take the company public without giving Rite Aid shareholders rewards in turn.
In addition to the aforementioned challenges, Glass Lewis and Institutional Shareholder Services, which are both influential investor advisory firms, encouraged investors to vote against the merger deal.
On the other hand, Albertsons said on Wednesday that it was not willing to renegotiate the terms of the deal.
“After careful consideration of all information available to our board of directors through today, we were unwilling to change the terms of the merger,” it said in a statement.
Meanwhile, Rite Aid chief executive officer John Standley also had some comments regarding the matter.
“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,” Standley said in a statement.
Rite Aid also said on Wednesday that its board is currently “evaluating governance changes at the company.” The company said the it will “continue to engage with stockholders” as it proceeds to the evaluation of those changes. Neither of the two companies will have to pay a break-up fee.
The pharmacy is scheduled to hold an annual meeting on October 30.
Rite Aid shares ended the session on Wednesday at $1.74 per share, or 1.16 percent higher, granting it a market capitalization of $1.86 billion. Its shares had slumped roughly 24 percent since it disclosed the deal in February.
Further, Albertsons was established by Cerberus and pool of investors in 2006. In 2015, the investment firms merged Albertsons with the grocer Safeway. However, the plans to take Albertsons public were halted by market volatility. It was later further stopped by Amazon’s acquisition of Whole Foods that upended the grocery market.
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Categories: Consumer product