Grocery chain Albertsons announced plans to acquire Rite Aid (NYSE: RAD) Tuesday, as the traditional grocery industry continues to look for growth by broadening offerings, not just store base.
A combined Albertsons and Rite Aid would have a value of roughly $24 billion, including debt. The two will together have about 4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington, D.C.
Most Albertsons' pharmacies will be re-branded as Rite Aid, and the company will continue to operate Rite Aid's stand-alone pharmacies.
Rite Aid in 2015 attempted to sell to its 4,600 stores to Walgreens (NYSE: WBA), but the deal was whittled down by regulators to a purchase of 1,932 stores for $4.37 billion.
The deal underlines the change in course that retailers are taking, no longer looking only to expand only by real estate footprint, but also by capability. Increasingly, retailers are looking to pharmacies for this expansion, which can take advantage of the frequency with which people buy prescription drugs.
There is also the opportunity to use store footprints as a base for both drug delivery and pick up.
For Albertsons, the deal is yet another transformative purchase put together by its private equity parent Cerberus Capital Management. Cerberus and a consortium of investors helped to form Albertsons in 2006. It then later merged with the grocer Safeway in 2015.
The news sent Rite Aid shares up nine cents, or 4.2%, to $2.22, within a 52-week trading range of $1.38 to $6.15.
