F&D Reports / Creditntell Release Operational Expectations of Albertsons – Rite Aid Merger Announcement

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Report Provides an Analysis of the Proposed Deal, Contingencies, Termination Rights, Funding, and Financial and Operational Expectations

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With Rite Aid's reduced scale, loss of national footprint, and declining operating results, the question arose as to what options would be left. Albertsons picking up the rest of the pieces will create a player with the scale needed to better compete.

Industry-leading retail financial consulting firm Information Clearinghouse, Inc. (ICI), through its F&D Reports and Creditntell divisions, has released a Special Update on the recently announced merger of Albertsons Companies and Rite Aid Corporation.

The merger is the latest within the retail grocery and drug space, reflecting increasing consolidation among the major players as the retail landscape continues to shift, including the impact of growing ecommerce competitors. The agreement also provides Albertsons' private equity holders, a consortium led by Cerberus, an avenue to go public, considering its planned initial public offering has been on hiatus since it was announced in July 2015. On a pro forma basis, the combined company is expected to generate year one revenues of approximately $83.00 billion and adjusted EBITDA of approximately $3.70 billion (including cost synergies). Albertsons has arranged $8.40 billion in new debt financing, including revolving, term and bridge loan facilities, to complete the cash portion of the acquisition, refinance certain of Rite Aid's existing $6.83 billion in debt, and pay fees. The merger agreement includes a mutual termination right in the event that it is not consummated by August 18, subject to extension to November 18.

In addition to detailing the specific terms of the agreement as well as operational expectations for the combined company, ICI's Special Update provides Rite Aid's fiscal 2019 guidance, expected cost synergies, and geographic coverage / market position of the combined company. The report also offers a pro forma financial snapshot and ICI's proprietary company credit ratings.

Commenting on the Albertsons – Rite Aid Special Update, ICI CEO Lawrence Sarf stated, "Rite Aid has struggled for years, and stakeholders were thrown a lifeline when Walgreens agreed to acquire 1,932 of its stores. With its drastically reduced scale, loss of national footprint, and declining operating results, the question arose as to what options would be left for the shrinking and troubled chain. This week's announcement, with privately held Albertsons picking up the rest of the pieces, will create a larger player with the scale needed to better compete. However, it remains to be seen how both of these struggling retailers will create a more compelling shopping experience to improve their top-line performance."

Information Clearinghouse, Inc. (publisher of F&D Reports & Creditntell) is a leading credit consulting firm specializing in the analysis of public and private companies in numerous retail segments. The focus of its analysis is to deliver the key intelligence today's busy credit executive needs to make a highly informed decision without sifting through pages of non-essential data. To learn more, visit our websites at http://www.fdreports.com and http://www.creditntell.com.

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Mike Blackburn
F&D Reports
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