Rite Aid and the grocer Albertsons called off an agreement to become a single company with the deal facing shaky prospects in a shareholder vote.
The owner of Safeway and other grocery brands had announced in February plans to buy Rite Aid’s more than 2,500 stores with the goal of becoming “a leader in food, health and wellness.” But a major shareholder and two proxy advisory firms came out against the deal.
Rite Aid Chairman and CEO John Standley said in a prepared statement late Wednesday that after hearing the views of shareholders, the drugstore chain is “committed to moving forward and executing our strategic plan as a (stand-alone) company.”
Rite Aid also said its board will consider governance changes, although it did not elaborate.
The company cancelled a shareholder meeting to vote on the deal that had been scheduled for Thursday. Both businesses said neither party will be responsible for any payments due to the deal’s termination.
Privately held Albertsons Cos., based in Boise, Idaho, was offering either a share of its stock and $1.83 in cash or slightly more than one Albertsons share for every 10 Rite Aid shares.
One of Rite Aid’s biggest shareholders, Highfields Capital Management, said that deal was “in the best interests of Albertsons and Rite Aid management, but not Rite Aid shareholders.” The investment firm said in June that it would vote its roughly 47 million shares against the deal.
Two prominent shareholder advisory firms — Glass Lewis & Co. and Institutional Shareholder Services — also recommended no votes. Glass Lewis said the deal was “not critical to Rite Aid’s viability” and provided no meaningful premium to investors.
Wall Street also has shown little confidence in the deal. The price of Rite Aid stock has mostly slipped since the acquisition was announced in February.
Rite Aid, based in Camp Hill, will face significant challenges continuing as a stand-alone company. The drugstore chain has struggled with high debt and tough competition from larger rivals, as narrowing drugstore networks have pushed customers away from its stores.
Earlier this week, Rite Aid said it was chopping its fiscal 2019 forecast because generic drug pricing wasn’t shaping up how it expected in April, when it first laid out expectations.
The nation’s largest drugstore chain, Walgreens, tried unsuccessfully to buy all of Rite Aid last year but scuttled that deal after encountering regulatory resistance. Last September, Walgreens Boots Alliance Inc. announced a slimmer agreement to buy nearly 2,000 Rite Aid locations and some distribution centers for about $4.38 billion.
Rite Aid had told shareholders last month that the Albertsons deal would help build scale and diversity as the company deals with challenges like increased competition and pressure on drug reimbursement rates.
Shares of Rite Aid slipped 19 cents to $1.55 in premarket trading Thursday.