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Here’s Why Rite Aid Fell 7% Yesterday

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Rite Aid’s management requests shareholders vote in favor of Albertsons merger

Rite Aid (RAD) stock tumbled 7% yesterday after the company issued a letter that asked shareholders to vote in favor of the pending merger with Albertsons. The letter highlighted the benefits of the proposed merger. It stated, “In the face of a consolidating and evolving marketplace, we have worked hard to defend and improve our competitive position. This merger accelerates those efforts by transforming our business strategically and financially and providing shareholders with the opportunity to realize significant value anticipated from the combination.”

The management also quoted analyst notes and media clippings in the letter. One of the quotes by Cowen stated, “We also think that the omni-channel platform makes the business more defensible against the potential threat of AMZN and retailers offering delivery services.”

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Rite Aid’s special shareholder meeting for the merger vote is scheduled for August 9. Albertsons announced its intention to merge with Rite Aid on February 20, 2018. Rite Aid’s shareholders will own around 30% of the combined company if the merger goes through. Wall Street reported in early April that a group of Rite Aid shareholders was planning to oppose the proposed merger, as they believe the deal is lopsided and undervalues Rite Aid.

Rite Aid stock movement

At the end of June 25, Rite Aid stock had risen 7.1% year-to-date. However, yesterday’s price decline pulled the stock back into the red. Rite Aid is now sitting at a YTD (year-to-date) loss of 0.5%. The company had fallen around 76% in 2017 after its proposed merger with Walgreens Boots Alliance (WBA) fell apart, and Walgreens finally bought half the number of stores originally planned.

Rite Aid is slated to report first-quarter 2019 results on June 27.

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