Rite Aid shareholders to vote on proposal

Wall Street is divided on Rite Aid's growth plan.
HARRISBURG (AP) -- Rite Aid Corp., which began as a single drugstore in northeastern Pennsylvania in 1962 and survived a near-death experience a few years ago, says it is ready for a growth spurt.
Shareholders will vote today on whether to expand the nation's third-largest drugstore chain by more than half, and make Rite Aid the largest drugstore chain operator on the East Coast. A majority of a quorum of shareholders will be required to enable the deal to go forward.
The deal would represent Rite Aid's first major acquisition since a turnaround team arrived to save the company from bankruptcy seven years ago -- a low point in the company's history that was brought on by a series of expensive acquisitions.
The latest plan is designed to catapult Rite Aid's store fleet to within reach of drugstore leaders Walgreen Co. and CVS Corp., but has divided Wall Street analysts and proxy advisers.
Details
Rite Aid would acquire the U.S. Eckerd and Brooks operations of Canada's Jean Coutu Group Inc. for 1.45 billion in cash and 250 million shares valued at about 1.5 billion, plus the assumption of 850 million in debt.
Rite Aid would still trail Walgreen and CVS in stores and revenue. Some analysts say Rite Aid is going deeper into debt and overpaying for stores that are losing customers and in need of significant upgrades. Others expect Rite Aid to close some of the stores, even if federal anti-trade regulators do not force some divestitures.
Still other analysts say Rite Aid is ready to take on the 1,858 additional stores and spend 950 million over five years that the company says will be required to remerchandise the Brooks and Eckerd stores, convert them to Rite Aid's systems and rebuild customer loyalty.
Plus, more scale will help Rite Aid compete against rapidly growing competitors in a sector that is reaching beyond the traditional retail pharmacy setting into providing preventive health care, managing pharmacy benefits and sending prescriptions to mail-order customers, some say.
Richard Hastings, senior retail analyst for New York-based credit advisory firm Bernard Sands LLC, said he believes Rite Aid has the savvy to revive the "deteriorating" Eckerd stores and win back customers.
"The solution is to adopt the Rite Aid package from A to Z, and that will prove to be very helpful," Hastings said.