Summary
Investors may not have liked the merger, but there is no downside protection without Albertsons.
Expect results to deteriorate as evidenced by the lowered guidance, which comes a month after the management reiterated it in Q1.
Company hints at new management.
Debt maturity profile provides enough time for a capable new management team to execute its plan.
I think this is a wait and see situation.
Members of our private investing community, Core Value Portfolio, get exclusive access to ideas like this one. Start your free trial today >>
When CEO was a good guy.
source: pennlive.com
After strong opposition from shareholders and advisory firms, the management announced that Rite Aid’s (RAD) merger with Albertsons has been officially terminated.
From the very beginning the proposed merger looked like a way for Cerberus to gain liquidity for its stake in Albertsons after multiple failed attempts to IPO. Rite Aid shareholders were going to be diluted to ~29% of the combined entity, effectively forcing them to accept a permanent loss on the stock as it would have been difficult for a $24 billion (enterprise value) grocer to grow meaningfully.
