Thirteen days after Albertsons Cos. announced that it planned to acquire approximately 2,500 Rite Aid drug stores in a cash-and stock deal, the Boise, ID-based grocery retailer said that it has hired industry veteran Jim Donald to serve as president and COO of the supermarket chain.
As part of the deal, Albertsons would hold 71 percent of newly combined company that, because of the Camp Hill, PA-based drug chain’s current status, will remain a publicly-traded company. The deal will enhance Albertsons’ presence on the East Coast and West Coast where most of the Rite Aid’s stores are located.
More than 1,900 other Rite Aid units and three distribution centers were sold to Walgreens last year.
Current Rite Aid chief executive John Standley will become CEO of the new organization and Bob Miller, whom he worked with at Fred Meyer, will become chairman. Standley and Miller have a long association – with Miller previously serving as CEO of Rite Aid (he brought Standley in and remains on Rite Aid’s board) and at Pathmark where the 73-year old industry leader was chairman of the board. The new company will maintain two headquarters locations – Boise and Camp Hill.
As for Jim Donald, he returns to the company where he began his industry career with in the 1970s. Most recently, he served as CEO of Extended Stay Hotels from 2012-2015. In addition to his previous stint at Albertsons (in Florida and Texas), the 64-year old grocery executive has served in leadership positions with Walmart, Safeway’s eastern division (prior to Albertsons’ ownership), Haggen and as chief executive of Pathmark. Donald also was CEO of Starbucks from 2005-2008. He still resides in Seattle and had also served as a member of the board of directors of Rite Aid from 2008 to 2013.
In his new post, Donald will have responsibility for the operations of the retailers’ more than 2,300 store portfolio and help with the acceleration of the company’s growing omnichannel platform. Following the close of the merger with Rite Aid, Donald will continue in this role and work alongside the rest of the combined company’s leadership team. Donald replaces Wayne Denningham, who retired earlier this year. Susan Morris, who was named executive VP and chief operations officer in January 2018, will continue in her role.
“Jim Donald has built an exceptional career in retail. His knowledge of our company and industry is unmatched, and I know his contributions will be invaluable as we enter the next chapter of Albertsons Companies,” said Miller. “We look forward to tapping his expertise in leading large consumer brands as we work every day to meet our customers’ needs, both in-store and online.”
Said Donald, “Having first worked at Albertsons 42 years ago, I have watched as an insider and from afar how their keen focus on customer service maintained a solid foundation for their team through the years. Their acquisitive nature combined with their recent innovation efforts and strong Own Brands portfolio have helped them to build an even stronger company today. I look forward to being a part of the team that takes this great company into the future and continues to serve the food, health, and wellness needs of today’s busy customers.”
Under the terms of the agreement between Albertsons and Rite Aid, in exchange for every 10 shares of Rite Aid common stock Rite Aid shareholders will have the right to elect to receive either one share of Albertsons Cos. common stock plus approximately $1.83 in cash, or 1.079 shares of Albertsons Cos. stock. Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28 percent to 29.6 percent stake in the combined company, and current Albertsons Cos. shareholders will own a 70.4 percent to 72.0 percent stake in the combined company on a fully diluted basis. Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons Cos. will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis. Following the close of the transaction and the share exchange, Albertsons Cos.’ shares are expected to trade on the New York Stock Exchange. The deal is expected to close in the second half of 2018.
At presstime, the combined company had not chosen a new corporate name, but in a conference call with analysts on the day of the announcement (February 20), it was revealed that the Rite Aid pharmacy brand will extend into most of Albertsons’ existing banners/brands including Acme, Safeway, Shaw’s, Star Market, Albertsons, Tom Thumb, Randalls, United Supermarkets, Pavilions, Haggen, Vons, Carrs and its newly acquired meal-kit firm, Plated. In the Chicago market, some stores will offer the Rite Aid brand, but other locations will retain the Jewel-Osco name because of its dominance.
The integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington DC, serving more than 40 million customers per week.
The combined organization would create a retail juggernaut with $83 billion in annual sales. Moreover, with Albertsons now poised to become a publicly-traded firm, its 12-year ownership by private equity firm Cerberus Capital Management LP will end. Cerberus attempted to engineer a public offering for Albertsons in 2015 but scrapped the plan because of unfavorable market conditions.
“We know that scale matters,” Miller told the Wall Street Journal. “We continue to grow to compete with all competitors, not just Amazon.”
The transaction has been approved unanimously by the boards of directors of both companies and remains subject to the approval of Rite Aid’s shareholders, regulatory approvals and other customary closing conditions.