Rite Aids Acquisition of Brooks and Eckerd Stores to Leverage Supply Chain Synergies

Today Rite Aid Corp. (Camp Hill, Pa.) announced the acquisition of the Brooks and Eckerd Stores for $2.5 billion in cash and stock plus $850 million in long-term debt from The Jean Coutu Group (PJC) Inc. (Longueuil, Quebec). The Jean Coutu Group (PJC) USA includes 1,858 drugstores (337 Brooks stores and 1,521 Eckerd stores) and six distribution centers, all located primarily on the East Coast and in the Mid-Atlantic states.

Following the merger Rite Aid will grow to approximately 5,000 drugstores, which will all be re-branded to Rite Aid. With annual post-merger revenues of $26.8 billion, the acquisition will reportedly strengthen Rite Aid’s position as the third largest national drugstore chain in the United States and create the largest drugstore chain on the East Coast.

In a news report, Rite Aid executives said they expect the transaction to yield significant cost efficiencies in merchandising, purchasing, advertising and distribution as well as administrative expenses. Net "synergies" are estimated to be $150 million after the first twelve months following the close.

"Successfully integrating these stores requires a strong infrastructure like the one we have built at Rite Aid, with information systems and a supply chain already capable of supporting a significant increase in the number of stores," said Mary Sammons, president and CEO of Rite Aid. "We believe the stores will also benefit from our proven front-end merchandising programs, innovative advertising and promotion programs, successful pharmacy marketing initiatives, solid supplier relationships, state-of-the-art technology and strong field structure. With 70% of the acquired stores located in states where we already operate, we expect to leverage our systems, programs, best practices and executive management talent to improve profitability by achieving substantial cost savings and growing sales.