Shareholder Activism

June 29, 2018

 

Rite Aid Investor, Thomas Evankovich, Wants Peek at Records of $3.1B Albertsons Deal

 

By Jacob Rund

A Rite Aid Corp. stockholder is suing the pharmacy chain for access to internal records in an effort to unearth evidence of mismanagement or self-dealing surrounding a pending sale to Albertsons Companies Inc.

The investor, Thomas J. Evankovich, filed a complaint June 29 in Delaware Chancery Court that claims the $3.1 billion transaction “appears to have been driven by the self-interests” of Rite Aid’s officers and directors. It’s the second lawsuit over the Albertsons deal to surface in Delaware state court since April 24.

Evankovich, according to the complaint, “seeks inspection to ascertain the truth of what happened during the sales process, and why.” He also seeks “to learn the truth about the management projections and financial analyses on which the board rested its recommendation for approval of the merger.”

A Rite Aid spokesperson did not immediately respond to a request for comment.

Shareholders often use “books and records” complaints as launchpads for future lawsuits against a company’s directors. Delaware has set a relatively low bar for investors to gain access to requested company records, but settlements in these cases are common.

Rite Aid stockholders, under the terms of the sale agreed to in February, are able to exchange 10 shares for either one share of Albertsons stock and $1.83 in cash, or 1.079 shares of Albertsons stock.

The deal would give Albertsons, a privately held grocery chain, control of the remaining Rite Aid stores not purchased by Walgreens Boots Alliance Inc. last year. U.S. antitrust regulators cleared the transaction in March, but Rite Aid shareholders will need to approve it through a vote scheduled for August 9.

The case is Evankovich v. Rite Aid Corp. , Del. Ch., No. 2018-0471, complaint filed 6/29/18 .

To contact the reporter on this story: Jacob Rund in Washington at jrund@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

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Rite Aid and Albertsons agree to abandon merger in the face of opposition

 

Originally published August 8, 2018 at 8:00 pm Updated August 9, 2018 at 7:15 am

The companies said that they had mutually agreed to terminate the merger and that neither would be responsible for any payments to the other side.

By 

MICHAEL CORKERY

The New York Times

The Rite Aid pharmacy chain announced Wednesday that it had called off its proposed merger with Albertsons, the grocery retailer, after the deal appeared to lose the support of its shareholders.

The announcement came on the eve of a special meeting of Rite Aid shareholders to consider the merger. That meeting will not take place, the company announced.

“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 stand-alone company,” said John Standley, the pharmacy chain’s chief executive.

The companies said that they had mutually agreed to terminate the merger and that neither would be responsible for any payments to the other side.

Albertsons, in a statement, said it disagreed with “the conclusion of certain Rite Aid stockholders and third-party advisory firms” that the deal undervalued the drugstore chain, but would not alter the terms of the deal.

As part of the proposed deal, Rite Aid shareholders would have owned 30 percent of the combined companies.

The deal was supposed to solve several challenges facing the two old-line companies in a retail landscape that is being turned upside down by consolidation, bankruptcies and rapid digital innovation.

Rite Aid had previously sought to bolster its market position in the pharmacy business by merging with Walgreens. But talks between two of the biggest drugstore chains in the United States ended after antitrust authorities indicated they were unlikely to approve the combination. Instead, Rite Aid agreed last year to sell 1,932 stores and three distribution centers to Walgreens for $4.38 billion.

Under the deal that was called off Wednesday, Albertsons would have rebranded its in-store pharmacies under the Rite Aid name and would have continued to operate some stand-alone Rite Aid pharmacies.

Foot traffic to the in-store pharmacies was supposed to help Albertsons raise the number of customers walking through its food aisles, increasing the chances that they would buy a banana or a rib-eye steak on their way out.

It would have also enabled Albertsons’ largest investors, including the private equity firm Cerberus, to cash out of its longtime investment in the grocery chain.

Rite Aid’s board, meantime, tried to convince shareholders that Albertsons’ digital capabilities and financial strength would help the pharmacy chain grow in the face of stiff competition.

But it was hardly the transformative deal that rivals have pursued — such as CVS’s proposed merger with Aetna, the health insurer, or Walmart’s efforts to deepen its ties with Humana.

Founded in Boise, Idaho, in 1939, Albertsons grew primarily throughout the western United States. The supermarket originally sold itself in 2006 to a group that included Supervalu, CVS and a partnership made up of Cerberus and several real estate firms.

The Cerberus group then bought grocery chains, including Albertsons, from Supervalu in 2013 for about $3 billion.

Since 2012, Albertsons has grown from just 192 stores and annual revenue of $4 billion to 2,318 stores with revenue of $60 billion.

A big driver of that expansion came in 2014 when Cerberus and other investors agreed to buy Safeway, another supermarket chain, for $9.2 billion — creating a grocery giant.

Still, Albertsons has struggled, in some markets, to distinguish itself from competitors. Amazon’s acquisition of Whole Foods last year, and Walmart’s huge investment in its grocery offerings, has only added to those challenges.

This story was originally published at nytimes.com. Read it here.

 

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Rite Aid’s CEO is out as company cleans house

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Rite Aid Investor Demands Information On Albertson’s Deal

By Rose Krebs

Law360 (July 2, 2018, 6:43 PM EDT) — A Rite Aid stockholder filed a complaint in Delaware Chancery Court on Friday seeking to inspect the company’s books to determine if there was any fiduciary wrongdoing as the drugstore chain nears its possible merger with the Albertson’s grocery business.

Rite Aid shareholder Thomas J. Evankovich, CFA wants “to determine whether wrongdoing or mismanagement has taken place such that it would be appropriate to file claims for breach of fiduciary duty, and to investigate the independence and disinterestedness of the company’s directors generally and with respect to the company’s proposed acquisition,” the complaint states.

The proposed merger may have been “driven by the self-interests of the company’s officers and directors,” and Rite Aid CEO John Standley had an “obvious incentive” to favor a sale to Albertsons Cos. because the supermarket chain had an interest in him as post-merger CEO, the complaint states.

The investor contends a Rite Aid board member who led the negotiating committee had a relationship with Albertsons’ controlling stockholder that possibly led to him “securing for himself a seat on the post-merger board instead of on negotiating a fair deal for the stockholders.”

“The result of this deeply conflicted process was that the board agreed to sell the company for a price that effectively values it at less than a third of the price per store that it had recently received in a sale of nearly 2,000 stores,” the complaint states, referring to the sale of some Rite Aid stores to Walgreens last year. “Meanwhile, stockholders will receive almost no cash but instead will receive shares in a combined company that is highly leveraged and worse-positioned than the pre-merger Rite Aid.”

Tom Evankovich is seeking records detailing projections and financial information used by the company’s board in making its recommendation for the merger.

Last month, the investor made a written request to inspect various company records, including filings to the U.S. Securities and Exchange Commission, minutes of board meetings and documents relating to the proposed merger that were prepared by financial advisers. The complaint contends the request was properly filed under section 220 of Delaware General Corporation Law but denied the week after it was submitted.

Under Delaware law, investors can have the Chancery Court compel a company to release its books and records for inspection if the shareholder can show a proper purpose such as investigating wrongdoing.

Albertsons, owned by Cerberus Capital Management LLC, is one of the largest privately held companies in the world and operates the Vons, Pavilions and Safeway chains, as well as its own grocery stores.

Albertsons would acquire the parts Rite Aid excluded from the pharmacy chain’s deal with Walgreens Boots Alliance Inc. last year. Rite Aid’s larger $17.2 billion proposed merger with Walgreens was scrapped and scaled back amid regulatory pushback.

Walgreens’ merger took in 1,932 Rite Aid stores and three distribution centers for about $4.4 billion. Albertsons agreed to take up the balance in February, in a deal that includes the company’s pharmacy benefit company.

Rite Aid shareholders are expected to hold between 28 percent and 29.6 percent in the combined company, with Albertsons shareholders owning between 70.4 percent and 72 percent.

Last week, Rite Aid announced that the SEC declared its proxy statement effective and that it was sending letters about the proposed merger and voting instructions out to shareholders of record as of June 22. A special meeting of shareholders is set for Aug. 9 at the office of Skadden Arps Slate Meagher & Flom LLP in New York, according to the news release.

The case was assigned to Chancellor Andre G. Bouchard, according to court records.

Rite Aid issued a statement saying, “Rite Aid believes that the lawsuit filed in Delaware demanding company documents, which is filled with baseless conjecture and rampant speculation, fails to identify any legitimate basis for the demand and is not compliant with applicable law. Rite Aid intends to vigorously oppose the lawsuit.”

Representatives for Evankovich did not immediately respond to requests for comment Monday.

The activist investor is represented by Bruce McNew of Cooch and Taylor PA, Randall J. Baron, David T. Wissbroecker and Christopher H. Lyons of Robbins Geller Rudman & Dowd LLP.

Counsel information for Rite Aid was not immediately available.

The case is Evankovich v. Rite Aid Corporation, case number 2018-0471, in the Court of Chancery of the State of Delaware.

 

–Additional reporting by Jeff Montgomery and Chelsea Naso. Editing by John Campbell.

 

https://retailleader.com/more-opposition-rite-aid-albertsons-deal

 

More opposition to Rite Aid-Albertson’s deal

 

By Gina Acosta – 07/03/2018

It’s the second lawsuit over the Albertson’s deal to surface in Delaware state court since April 24.

A Rite Aid stockholder is suing to stop the drugstore chain’s merger with the Albertson’s grocery business.

According to Bloomberg, Rite Aid shareholder Thomas J. Evankovich CFA filed a complaint June 29 in Delaware Chancery Court that claims the $3.1 billion transaction “appears to have been driven by the self-interests” of Rite Aid’s officers and directors. It’s the second lawsuit over the Albertson’s deal to surface in Delaware state court since April 24.

Evankovich, according to the complaint, “seeks inspection to ascertain the truth of what happened during the sales process, and why.” He also seeks “to learn the truth about the management projections and financial analyses on which the board rested its recommendation for approval of the merger.”

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