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The Central Pennsylvania Business Journal reports that two investor advisory firms - Glass Lewis and Institutional Shareholder Services - are objecting to the planned $24 billion merger of Albertsons and Rite Aid, and are recommending that shareholders vote against it next month.

The story says that “Glass Lewis considers the deal a merger of equals with little takeover premium paid to Rite Aid investors. ISS argued that Albertsons is getting Rite Aid at a discount.

“Under the proposed deal, Rite Aid shareholders stand to own about 30 percent of the new company, while shareholders of closely held Albertsons would control the remaining 70 percent.”

The Business Journal notes that the two advisory firms’ recommendations “are followed by major mutual funds” that are shareholders affected by the deal.

The story notes that these are not the only objections to the deal: “Rite Aid has faced opposition from some investors who believe a Rite Aid-Albertsons union may not be the right fit at the offered price, despite the added pressure on retailers to cut costs, expand their reach and differentiate themselves amid growing competition from online sales.

“Rite Aid, critics say, might do better by partnering with another retailer to run its pharmacies, rather than join a grocery company facing stiff competition and tighter margins. Albertsons also has a lot of debt, which ISS cited as a risk.”

The shareholder vote is scheduled for August 9.
KC's View:
I’m not smart enough to have a truly educated opinion about this, though I keep hearing from readers who argue that the deal emphasizes size at a time when size may be less important than the ability to be nimble, and that it is designed to be investor-centric in a way that does not serve the business’s various stakeholders and its long-term sustainability.

I’m not sure about this, mostly because I have a ton of faith in COO Jim Donald to make all this work. But there is no unanimity in this opinion.