Shares in US pharmacy chain Rite Aide surged by 26% in pre-market trading on Tuesday after the group revealed it had agreed a merger with privately-owned US grocery giant Albertsons.
Under the agreement, Albertsons will buy the remainder of Rite Aid that isn´t already being acquired by pharmacy group Walgreens Boots Alliance.
Rite Aid chief executive John Standley will become chief executive of the combined entity, while current Albertsons chief executive Bob Miller will be chairman.
The deal will see Albertsons, which is currently controlled by private equity investors, assume a public listing. Albertsons owns 20 supermarket brands, including Safeway.
“The combined platform positions Rite Aid to capitalise on our pharmacy expertise and expand and enhance our pharmacy footprint. We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders,” said Standley.
The cash and stock merger will create one of the largest food and health groups in America, with the combined group set to have annual sales of around $83bn.
Rite Aid shareholders are to receive either one Albertsons share and $1.83 in cash or 1.079 Albertsons shares for every ten shares of Rite Aid they own.
Albertsons will own just over 70% of the combined group, leaving Rite Aid shareholders with just under 30%.
Albertsons and Rite Aid claim to be targeting annual synergies of around $375m.
"The combined company expects to deliver annual run-rate cost synergies of $375m in approximately three years and access potential annual revenue opportunities of $3.6bn. Over 60% of the cost synergies are expected to be realized within the first two years post-close," said the two companies in a statement.