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Rite Aid, Albertsons try swaying shareholders into voting ‘yes’

Albertsons Companies and Rite Aid think they have a leg up against rivals like Walmart and Amazon, and they want investors to know it.

As the two companies head into an August vote over their planned merger, they have message for investors — especially those who have pushed back against the combination: “size still matters,” according to CNBC.

The analogy refers to the breadth of a deal, announced in February, which would combine Albertsons' grocery operations with Rite Aid's pharmacy business. The deal valued at $24 billion will also take the privately held grocer public.

To sway investors, Rite Aid sent a letter to shareholders detailing the merits of the proposed merger, along with the company's recommendation that shareholders should vote in favor of the transaction.

According to the letter, post-merger Rite Aid will become a top-five food and drug retailer. It will also benefit from improved scale, a more diversified business, and a stronger market position. The deal will also accelerate the pace of Rite Aid’s business transformation.

Financially, the merger could also give Albertsons and Rite Aid greater ability to find $375 million in cost savings that would help the two invest in necessary technology for the future. In addition, the deal provides $3.6 billion in expected incremental revenue opportunities, the letter said.

Further, the companies argue that the combination will allow them to better leverage important assets such as Rite Aid’s EnvisionRxOptions integrated pharmacy benefit manager; RediClinic in-store health clinics, and Health Dialog health management solution across a broader customer base. The deal will also increase both companies’ local market scale, giving them greater density in key existing markets. Specifically, it would give the partners a particularly large presence on the East and West coasts, CNBC reported.

“We ask for your support by voting your shares for the merger to accelerate Rite Aid's strategic and financial transformation and to realize the significant value we anticipate through ownership in a stronger, better-positioned company,” John Standley, Rite Aid chairman and CEO said in the letter.

The deal takes a direct swipe at Walmart, which is stepping up investments in grocery and e-commerce. Further, the discount giant has had preliminary discussions to acquire Humana, the second-largest provider of Medicare Advantage plans, or private insurance plans offered through Medicare.

Similarly, CVS Health is inching toward finalizing its acquisition of health insurer Aetna.

Meanwhile, Amazon continues to gain a foothold in grocery through its recent $13.7 billion acquisition of Whole Foods Markets. The online giant is also working with Berkshire Hathaway and JPMorgan Chase on forming an independent company that will address health care for the U.S. employees of their respective companies with the aim of lowering costs and improving satisfaction.
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