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Kroger, Not Albertsons, Should Get Rite Aid

Apr. 01, 2018 12:44 PM ETRite Aid Corporation (RAD)KR, ABS603 Comments
Phil Anthropy profile picture
Phil Anthropy


  • Kroger is a better choice than Albertsons to get Rite Aid.
  • Everybody would end up better off.
  • Except the Rite Aid CEO, that is.

In my opinion, Rite Aid's (NYSE:RAD) stock is a "hold" at this point, having been beaten down to a level not seen in several years. The current merger with Albertsons (ABS) appears to some as a bad deal for RAD, but RAD's stock is now a speculative buy at this price for upside "arbitrage" on the merger. If the Albertsons-RAD "newco" stock comes out at a favorable price, there is immediate profit. The downside risk is that the stock may start trading at a drastically undervalued level, either as a result of market forces (or deliberately?), or that the newco stock price may plunge so fast that RAD shareholders don't have a chance to dump it before it tanks. Such speculation didn't work in the earlier Walgreens Boots Alliance (WBA) deal, and may not work here, either.

A few days ago, on March 29, 8 million shares of RAD moved in several big block trades, according to a SA comment from Catalyst7 in my previous article on RAD. A buying trend might signal a growing consensus for successful arbitrage, but only if it continues. One potential tailwind is that if the newco stock price were set too low (hypothetically), the SEC might take notice.

Some might feel that the merger is beset by "miasmas of suspicions." This would not be the first time for stockholder accusations. After the original merger with WBA was proposed there was litigation that makes interesting reading, although class action lawsuits are not uncommon and often do not prevail on the merits. Item 4 in that lawsuit document says:

"The Proposed Transaction is the product of a hopelessly flawed process that failed to maximize shareholder value and was designed to ensure the sale of the Company to the buyer willing to pay significant merger-related bonuses, and provide

This article was written by

Phil Anthropy profile picture
I am retired from government service after a career in administration and computer management, most of it spent overseas. My academic background includes a master's degree in computer science. I have over 30 years investment experience. Since my retirement I have become a more active trader in both stocks and options. My major strategy for gradual profits has been to buy solid stocks (mostly tech sector) in trading ranges, and then to sell one month covered calls. I also sell at-the-money short puts on beaten down stocks. Using real-time quotes and charts, I make occasional trades based upon price or volume acceleration. I do most of my short-term trading in an IRA, which reduces record keeping and defers taxes. My goal is eventually to generate enough profits to permit significant philanthropy. An alternative would be to work for a charitable or philanthropic organization, which I am considering.

Analyst’s Disclosure: I am/we are long RAD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Long and still holding, but another sharp drop in the stock price could impel me to reevaluate.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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