With the completion of its acquisition of 1,854 Brooks and Eckerd drugstores, Rite Aid becomes the largest drugstore chain operating on the East Coast of the U.S. and the third largest overall.
The company, in a press release to announce the completion of the deal with the Jean Coutu Group, said it sees what it called "substantial opportunities to reduce costs, improve operations and grow earnings."
Mary Sammons, president and CEO of Rite Aid, will also add the title of chairman as a result of this deal. She succeeds Robert Miller, who will remain as a member of the company's board.
Ms. Sammons, said, "We are ready to hit the ground running with a detailed integration plan that includes significant investments in the Brooks and Eckerd stores and in our new associates. With a much larger Rite Aid, we're confident we will have substantial opportunities to reduce costs, improve operations and grow earnings per share, which will generate greater value for our shareholders."
According to the press release, the Brooks Eckerd side of the business will be integrated into Rite Aid in phases. The company will change over Brooks and Eckerd locations to Rite Aid's systems and it will also integrate six distribution centers acquired in the deal.
All stores will eventually be rebranded as Rite Aid. The company plans minor remodels to each store in the initial phase with more extensive remodels and some relocations taking place over the next five years. The company intends to open 1,000 new or relocated stores over that time period.
"These are good stores in good locations with dedicated associates," said Ms. Sammons. "We are eager to bring them into Rite Aid, and we've got the infrastructure, management team, best practices and plan to do it."
Seventy percent of the stores acquired by Rite Aid are in 14 states where the drugstore chain currently operates. The company will add stores in Massachusetts, Rhode Island, North Carolina and South Carolina where it previously had no presence.
Discussion Questions: What do you see as the challenges and opportunities for Rite Aid now that is has closed the deal to acquire Brooks and Eckerd? What, if anything, makes you believe that Rite Aid will be successful in making this large merger work when so many others, including Coutu's acquisition of Eckerd, have failed?