RITE AID: Looking to Pull Out of West Coast?
Faced with accounting problems and large debt, Rite Aid Corp. is considering the sale of most or all of its West Coast stores, the Wall Street Journal reports today. The sale of Rite Aid's West Coast operations would "mark a reversal of the troubled drugstore chain's largest acquisition." The company's 1996 purchase of Thrifty Pay-Less Holdings for $1.4 billion more than doubled its size. According to a Rite Aid insider, the firm is asking an average of $2.5 million per store, or more than $2.5 billion for the entire West Coast operation. But the sale is still in early stages, and analysts estimate that the asking prices will fall if Rite Aid's financial situation deteriorates further. Merrill Lynch analyst Mark Husson, who doubts that the Rite Aid will find a buyer for the entire West Coast group, notes that if Rite Aid could "find somebody to take to whole thing off their hands at a reasonable price, they'd probably take the bidder's arm off." Husson speculates that Boise, Idaho-based Albertson's Inc. may be a potential bidder for some of the Rite Aid outlets. For several months, Rite Aid executives have been seeking buyers for between 250 and 350 of its West Coast stores; the sales are intended to help cut the company's debt load. In September, Walnut Creek, California-based Longs Drug Stores Corp. purchased 38 stores for $186 million. Rite Aid representatives declined to comment on whether the firm seeks to unload the entire West Coast operation, saying only "We continue to pursue asset sales." The company, "struggling" with financial turmoil and the resignation of its CEO Martin Grass, announced last month that it would restate its pretax profits, reducing them by half - - or $500 million -- for the past three fiscal years. Rite Aid stock rose by $1, or 18%, yesterday after a 31% plunge on Wednesday (Maremont, 11/12).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.