Albertsons Companies and Rite Aid Corp. announced on Wednesday that they are calling off their merger agreement. The $24 billion deal, announced in February, has faced opposition from a number of investors as well as top-10 shareholder Highfields Capital Management. Critics have argued the deal provides Albertsons’ private-equity owner, Cerberus Capital Management, a vehicle to take the company public without rewarding Rite Aid shareholders in return, according to CNBC. With Rite Aid and Albertsons unable to come to an agreement, they ultimately decided to call the merger off.
Albertsons said in a statement that even though it believes the strategic rationale of the Rite Aid combination was compelling and disagrees with the notion that is wasn't offering sufficient merger consideration to Rite Aid stockholders, "we were unwilling to change the terms of the merger." Rite Aid Chairman and CEO John Standley said in a statement that "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." Under the terms of the merger agreement, neither Rite Aid nor Albertsons will be responsible for any payments to the other party as a result of the termination.
Total Retail's Take: Wednesday's announcement is a blow to Rite Aid and Albertsons, which are both facing increased competition (cough, Amazon.com, cough) in their respective industries. In the end, the two sides were unable to structure a deal that sufficiently appealed to investors. In my opinion, the termination of this deal doesn't signify that consolidation in the grocery and pharmacy verticals will slow down anytime soon. Companies in each vertical are seeking ways to fortify their businesses — under increased pressure from online competitors — and acquisition remains a primary way of doing so.