Rite Aid

Rite Aid is a major U.S. drugstore chain headquartered out of Camp Hill, Pennsylvania.

History
Alex Grass founded the Rite Aid chain in Scranton, Pennsylvania, in September 1962, after marrying into Harrisburg Pennsylvania's Lehrman family in the early 1950s. The first store was called Thrift D Discount Center. The store expanded into five additional states in 1965 and went public as Rite Aid in 1968.

Growth and acquisitions
Ten years after its first store opened, Rite Aid operated 267 locations in 10 states. In 1981, Rite Aid became the third-largest retail drugstore chain in the country. 1983 marked a sales milestone of $1 billion. A 420-store acquisition along the east coast expanded Rite Aid's holdings beyond 2,000 locations, as did the acquisition of Gray Drug in 1987. Among the companies acquired was Baltimore, Maryland's Read's Drug Store. On April 10, 1989, Peoples Drug's 114 unit Lane Drug of Ohio was purchased by Rite Aid.

Rite Aid acquired twenty-four Hook's Drug stores from Revco in 1994, selling nine of those stores to Perry Drug Stores, a Michigan-based pharmacy chain. One year later, in turn, the 224-store Perry chain was acquired by Rite Aid. The 1,000-store West Coast chain Thrifty PayLess was later acquired in 1996. The acquisition of Thrifty PayLess included the Northwest-based Bi-Mart membership discount stores, which was sold off in 1998. Acquisitions of Harco, Inc. and K&B, Inc. brought Rite Aid into the Gulf Coast area.

In the 1990s, Rite Aid partnered with Carl Paladino's Ellicott Development Co. to expand the company's presence in upstate New York. On August 23, 2006, the Wall Street Journal announced that Rite Aid would acquire 1,858 Eckerd Pharmacy and Brooks Pharmacy stores from Jean Coutu for US$3.4 billion. The deal closed on June 4, 2007. Rite Aid announced that the two chains would be converted to the Rite Aid name, retiring the 109-year-old Eckerd banner. The merger was signed and completed as of June 4, 2007, with all remaining Eckerd stores converted to Rite Aid by the end of September 2007. In 2015, Rite Aid purchased EnvisionRx, a pharmacy benefit manager, which owns subsidiary PBMs MedTrak, Connect Health Solutions, and Smith Premier Services.

Partnerships
General Nutrition Corporation (GNC) and Rite Aid formed a partnership in January 1999, bringing GNC mini-stores within the Rite Aid pharmacies. A partnership with drugstore.com in June 1999 allowed customers of Rite Aid to place medical prescription orders online for same-day, in-store pickup. Amazon announced in June 2019, that Amazon shoppers will be able to pick up their purchases at designated counters inside more than 100 Rite Aid stores across the US. The new service is called Counter and launches in the US after finding success in the UK with the Next clothing chain and in Italy with Giunti Al Punto Librerie, Fermopoint and SisalPay stores.

Company Troubles
In July 2001, Rite Aid agreed to improve their pharmacy complaint process by implementing a new program to respond to consumer complaints.

On June 21, 2002, the Securities and Exchange Commission (SEC) filed accounting fraud charges against several former senior executives of Rite Aid Corp. The U. S. Attorney for the Middle District of Pennsylvania simultaneously announced related criminal charges. The Commission's complaint charges former CEO Martin Grass, former CFO Frank Bergonzi and former Vice Chairman Franklin Brown with conducting a wide-ranging accounting fraud scheme. The complaint alleges that Rite Aid overstated its income in every quarter from May 1997 to May 1999, by massive amounts. When the wrongdoing was ultimately discovered, Rite Aid was forced to restate its pre-tax income by $2.3 billion and net income by $1.6 billion, the largest restatement ever recorded. The complaint also charges that Grass caused Rite Aid to fail to disclose several related-party transactions, in which Grass sought to enrich himself at the expense of Rite Aid's shareholders. In 2003, six former Rite Aid senior executives were convicted of conspiracy regarding a wide range of accounting fraud and false filings with the U.S. Securities and Exchange Commission (SEC). Martin Grass was sentenced to eight years in prison, which at the time was one of the harshest punishments ever given in connection to an accounting-related crime. Rite Aid was forced to restate its earnings by $1.6 billion, which at the time was one of the largest restatements in U.S. history. After serving six years in prison, Martin Grass was released on January 18, 2010.

On July 25, 2004, Rite Aid agreed to pay $7 million to settle allegations that the company had submitted false prescription claims to United States government health insurance programs.

In August 2007, Rite Aid acquired approximately 1,850 Brooks and Eckerd Stores throughout the United States in hopes of improving their accessibility to a wider range of consumers. On December 21, 2007, The New York Times reported that Rite Aid had record-breaking losses that year, despite the acquisition of the Brooks and Eckerd chains. The following fiscal quarter saw an increase in revenue but a sharp fall in net income as Rite Aid began the integration process. Rite Aid shares fell over 75% between September 2007 and September 2008, closing at a low of $0.98 on September 11, 2008. Rite Aid shares subsequently dropped to $0.20 on March 6, 2009, the all-time low as of 4 December 2018.

In October 2018, a former Rite Aid vice president of advertising and two co-owners of Nuvision Graphics Inc. pleaded guilty to in a $5.7 Million kick-back scheme defrauding Rite Aid.

Merger with Eckerd and Brooks
On August 23, 2006, the Wall Street Journal announced that Rite Aid would be buying the Eckerd Pharmacy and Brooks Pharmacy chains (Brooks Eckerd Pharmacy) from the Quebec-based Jean Coutu Group for US$3.4 billion, and merging the two chains into one dominant pharmacy system. The company's shareholders overwhelmingly approved the merger on January 18, 2007.

Similar to what CVS experienced in the Chicago metropolitan area after its purchase of Albertsons drug store chains, the deal gave Rite Aid stores that were too close to each other. (Only 23 stores nationally were sold to Walgreens, The Medicine Shoppe, or independent owners to meet federal regulations.) In many situations, especially in Pennsylvania, where both chains were dominant and had roots in the Commonwealth (Rite Aid originated in Scranton; Eckerd began in Erie, while Thrift Drug was popular in the Pittsburgh area), there were, in some cases, neighboring Rite Aid stores. However, in March 2008, some of these overlapping stores were closed. Most of these stores that closed were pre-existing Rite Aids from before the Eckerd deal, since Eckerd had built newer, more modern stores with drive-through pharmacies and larger space under ownership of both JCPenney and Jean Coutu Group; and the "moved to" sites were converted Eckerds.

Rite Aid had sold some stores to JCPenney's Thrift Drug chain in the mid-1990s shortly before JCPenney's acquisition of Eckerd and had also sold all of their Massachusetts stores to Brooks in 1995, bringing some existing Eckerd and Brooks stores that were once Rite Aids full circle.

Because Eckerd was previously owned by JCPenney, Eckerd stores accepted JCPenney charge cards. Since the merger, all Rite Aids take JCPenney charge cards, a policy also followed by competitor CVS pharmacy, which had earlier acquired most of the Eckerd chain in the southeastern United States.

Market exits
On January 4, 2008, Rite Aid Corporation announced that it would terminate operation of its 28 Rite Aid stores in the Las Vegas, Nevada, area and had signed an agreement to sell patient prescription files from that metro market to Walgreens. The company said Las Vegas was a non-core market that had not been contributing to overall results, and it had not opened a new store there since 1999. One Nevada store would remain open in Gardnerville, near the California border, where Rite Aid at the time had more than 600 stores. On February 5, 2009, Rite Aid announced that it would terminate operations of seven Rite Aid stores in San Francisco, along with five stores in eastern Idaho through a sale to Walgreens.

Sale of stores to Walgreens
On October 27, 2015, Walgreens announced that it would acquire Rite Aid in a deal valued at $9.4 billion ($9 per share), pending regulatory and shareholder approval. The deal would have resulted in a merger of two of the United States' three largest pharmacy chains. Walgreens planned to keep the Rite Aid name on existing stores when the deal went through, though the long term plans for the Rite Aid name were unknown. On December 21, 2016, it was announced that Fred's would acquire 865 Rite Aid stores as a result of the merger for $950 million, for antitrust reasons. In January 2017, Rite Aid and Walgreens cut the price of the merger to approximately $6.8 billion and delayed the merger by six months. On January 31, 2017, it was reported that the workers' union 1199SEIU United Healthcare Workers East, representing 6,000 Rite Aid Corp workers, was opposed to the sale of the Rite Aid stores to Fred's Inc.

On June 29, 2017, Walgreens announced the merger was canceled, adding that it would be purchasing 2,186 stores from Rite Aid for $5.2 billion plus a $325 million penalty for canceling. Most experts had thought that the merger would be completed within a few weeks. The merger would have had about 46% of the market share. The revised deal—now not including Fred's at all—effectively would have seen Rite Aid exit the southeastern United States.

On September 19, 2017, the Federal Trade Commission (FTC) approved a fourth deal agreement, this time allowing Walgreens to purchase only 1,932 Rite-Aid stores for $4.38 billion. The sale was completed on March 27, 2018. Three distribution centers and related inventory were transferred after September 1, 2018, when the stores were rebranded to Walgreens. The 1,932 stores showed banners saying "Pharmacy now operated by Walgreens" in the meantime. After the acquisition, Walgreens closed about 600 stores over 18 months starting in spring 2018, mostly Rite Aid stores within a mile of an existing Walgreens.

Attempted acquisition by Albertsons
On February 20, 2018, Albertsons announced plans to acquire the remainder of Rite Aid, including the 2,600 stores not acquired by Walgreens, in a merger of equals, subject to shareholder and regulatory approval. On August 8, 2018, Rite Aid announced that the plan had failed to please shareholders and the proposed acquisition would be cancelled.

Resources

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