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Rite Aid and Albertsons Agree to Call Off Merger in Face of Opposition

Category: Business,Finance

The Rite Aid pharmacy chain announced on Wednesday it had called off its proposed merger with Albertsons, the grocery retailer, after the deal appeared to lose the support of its shareholders.

The announcement came on the eve of a special meeting of Rite Aid shareholders to consider the merger. That meeting will not take place, the company announced.

“While we believed in the merits of the combination with Albertsons, we have heard the views expressed by our stockholders and are committed to moving forward and executing our strategic plan as a stand-alone company,” said John T. Standley, the pharmacy chain’s chief executive.

The companies said they had mutually agreed to terminate the merger, and that neither would be responsible for any payments to the other side.

Albertsons said in a statement that it disagreed with “the conclusion of certain Rite Aid stockholders and third-party advisory firms” that the deal undervalued the drugstore chain, but would not alter the terms of the deal.

As part of the proposed deal, Rite Aid shareholders would have owned 30 percent of the combined companies.

The deal was supposed to solve several challenges facing the two old-line companies in a retail landscape that is being turned upside down by consolidation, bankruptcies and rapid digital innovation.

Rite Aid had previously sought to bolster its market position in the pharmacy business by merging with Walgreens. But talks between the companies, two of the biggest drugstore chains in the United States, ended after antitrust authorities indicated they were unlikely to approve the combination. Instead, Rite Aid agreed last year to sell 1,932 stores and three distribution centers to Walgreens for $4.38 billion.

Under the deal that was called off on Wednesday, Albertsons would have rebranded its in-store pharmacies under the Rite Aid name, and would continue to operate some stand-alone Rite Aid pharmacies.

Foot traffic to the in-store pharmacies was supposed to help Albertsons raise the number of customers walking through its food aisles, increasing the chances that they would buy a banana or rib-eye steak on their way out.

It would have also enabled Albertsons’ largest investors, including the private equity firm Cerberus, to cash out of its long time investment in the grocery chain.

Rite Aid’s board tried to convince shareholders that Albertsons’ digital capabilities and financial strength would help the pharmacy chain grow in the face of stiff competition.

But it was hardly the transformative deal that rivals have pursued — such as CVS’s proposed merger with Aetna, the health insurer, or Walmart’s efforts to deepen its ties with Humana.

Founded in Boise, Idaho, in 1939, Albertsons grew primarily throughout the western United States. The supermarket originally sold itself in 2006 to a group that included Supervalu, CVS and a partnership made up of Cerberus and several real estate firms.

The Cerberus group then bought a number of grocery chains, including Albertsons, from Supervalu in 2013 for about $3 billion.

Since 2012, Albertsons has grown to 2,318 stores with revenue of $60 billion from just 192 stores and annual revenue of $4 billion.

A big driver of that expansion came in 2014 when Cerberus and other investors agreed to buy Safeway, another supermarket chain, for $9.2 billion — creating a grocery giant.

Still, Albertsons has struggled in some markets to distinguish itself from competitors. Amazon’s acquisition of Whole Foods last year, and Walmart’s huge investment in its grocery offerings, has only added to those challenges.

A version of this article appears in print on , on Page B4 of the New York edition with the headline: Rite Aid and Albertsons Call Off Planned Merger After Losing Shareholders’ Support. Order Reprints | Today’s Paper | Subscribe

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