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Safeway owner Albertsons eyes Rite Aid deal in health care push

The owner of Safeway and other grocery brands is buying Rite Aid, including 44 of the drugstore chain’s Maryland stores, as retailers continue to plunge deeper into health care and adjust to swiftly changing shopping habits.

Albertsons Cos, one of the nation’s largest food retailers with more than 2,300 stores in 35 states, said Tuesday it will fold more than 2,500 Rite Aid stores in 19 states into its portfolio of brands, positioning the combined company to become “a leader in food, health and wellness.”

The merged company will have more than 4,300 pharmacies, a stronger presence on both coasts and about $83 billion in annual sales.

The deal does not include Rite Aid stores being acquired by Walgreen Boots Alliance Inc. The Federal Trade Commission cleared the way in September for Walgreen, the nation’s second largest drugstore chain, to purchase 1,932 Rite Aid Stores for $4.38 billion.

As of Feb. 8, Rite Aid had transferred more than half of those stores — 1,114 — to Walgreen and said it expected to complete the process by spring. Those transfers include 96 stores in Maryland, which, like the other transferred stores, will take on the Walgreens banner over time, said Rite Aid spokeswoman Ashley Flower on Tuesday. Walgreen tried unsuccessfully to buy all of Rite Aid last year but scuttled that deal after encountering regulatory resistance.

“At this time, we don’t have a list of Rite Aid stores in Maryland or the number of locations that are planned to transfer ownership to Walgreens,” said Jim Cohn, a Walgreen Co. spokesman, on Tuesday. He said no acquisitions of Maryland Rite Aids would be finalized until next month.

Walgreen has said it plans to close roughly 600 overlapping stores but hasn’t said where.

Once sales to Walgreen are completed, Rite Aid would have 44 stores left in Maryland, which subsequently would be acquired by Albertsons.

Albertsons said it will continue to run Rite Aid stand-alone stores, and most of the grocery operator's pharmacies will be rebranded as Rite Aid. Albertsons also runs Jewel-Osco, Shaw's, Vons and Acme stores. Albertsons, which has 68 stores, mostly Safeways, in Maryland, did not provide a list of the Rite Aid stores included in the deal.

The deal will create a company with “a large scale and diversified revenue base necessary to compete in today's highly competitive food and drug retail environment,” Moody's Vice President Mickey Chadha said in a statement.

Albertson’s move comes as the grocer has begun to strengthen its same-day deliveries, a meal-kit business and other products that cater to customers who want fast service.

Retailers have been pushing home deliveries and other customer-friendly services in the wake of expanded competition from Amazon. The online giant bought the grocer Whole Foods last year and plans to roll out a two-hour delivery service this year to customers who pay for its $99-a-year Prime membership.

Amazon's competitors also are bulking up health care services, which cannot be purchased online. Late last year, Rite Aid rival CVS Health Corp. said it would buy the health insurer Aetna for $69 billion. That deal could turn many of the chain's 9,800 stores into one-stop-shop locations for an array of health care needs like blood work and eye or hearing care in addition to their traditional role of filling prescriptions.

In Rite Aid, Albertsons is buying a chain that already has remodeled more than half of its stores into a format that includes expanded pharmacy services and more health products. Like its drugstore chain competition, Rite Aid operates walk-in clinics that can deal with cases of the flu, sinus infections and other relatively minor complaints. It also has a pharmacy benefit management business that runs prescription drug coverage.

Rite Aid, based in Camp Hill, Pa. with sales of $32.8 billion last year, has struggled with high debt levels and tough competition from CVS and Walgreen, as narrowing drugstore networks have pushed customers away from its stores.

Albertsons, which did not disclose the deal’s value, is offering either a share of its stock and $1.83 in cash or slightly more than a share for every 10 shares of Rite Aid.

The companies expect their combined entity to trade on the New York Stock Exchange. Shareholders of Boise, Idaho-based Albertsons, which is currently privately held, will own more than 70 percent of the combined company. Rite Aid Chairman and CEO John Standley will lead the combined company as CEO, while Albertsons leader Bob Miller will serve as chairman. The companies say they will keep headquarters in both Boise and Camp Hill.

The companies say the deal should close in the second half of this year, but regulators and Rite Aid shareholders still have to approve it.

The Associated Press contributed to this article.

lorraine.mirabella@baltsun.com

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