Rite Aid Corporation (RAD) was founded by Alex Grass in 1962 in Scranton, Penn., as a health and beauty store, originally called Thrift D Discount Center. The company changed its name to Rite Aid Corporation in 1968 ahead of its initial public offering (IPO) on the American Stock Exchange. In 1970, Rite Aid moved to the New York Stock Exchange (NYSE).
Here's a look at what came next for Rite Aid, including highlights of its growth, scandals, and deals with Walgreens and Albertsons.
Acquisitions Fuel Growth
Within 10 years of opening its first store, Rite Aid grew to 267 locations in 10 states. The company first achieved $1 billion in sales in 1983. In 1987, with the acquisition of Gray Drug (420 stores in 11 states), Rite Aid became the largest drugstore chain in the U.S., with more than 2,000 stores.
By 1996, Rite Aid doubled in size to 4,000 stores after several acquisitions, including Read’s Drug Store, Lane Drug, Hook's Drug, Harco, K&B, Perry Drug Stores, and Thrifty PayLess.
In 1999, Rite Aid formed a partnership with General Nutrition Companies that allowed GNC to open mini-stores within Rite Aid locations. In addition, Rite Aid partnered with Drugstore.com and offered Rite Aid customers the ability to place prescription orders online and get same-day in-store pickup. Also in 1999, Rite Aid acquired pharmacy benefits manager PCS Health Systems.
In 2007, Rite Aid added more than 1,500 stores with its acquisition of the Brooks and Eckerd drug store chains, and in 2015, it acquired pharmacy benefits manager Envision Pharmaceutical Services for $2 billion.
In 1999, Rite Aid began restating earnings from prior years due to accounting irregularities. 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).
These executives included former chief executive officer Martin Grass, the son of company founder Alex Grass. The former executives admitted to drastically overstating net income from 1997 to 2000 through multiple schemes.
Alex 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.
Deals With Walgreens and Albertsons
In October 2015, Walgreens announced it would acquire Rite Aid for $9 per share. Rite Aid’s shareholders approved the deal a few months later in February 2016.
However, the deal got hung up on regulatory approval complications from Walgreen’s side. The two companies extended talks into 2017 until they ultimately vacated the merger deal.
Instead of the merger, Walgreens and Rite Aid agreed to a $4.3 billion deal for Walgreens to buy 1,932 Rite Aid stores and three distribution centers. The deal was approved by the Federal Trade Commission in September 2017 and completed in March 2018.
Shortly after the Walgreen deal, Albertsons and Rite Aid began merger talks. On Feb. 20, 2018, the companies announced that supermarket retailer Albertsons had agreed to acquire Rite Aid in a deal valued at $24 billion.
However, the companies called the deal off on Aug. 8, 2018, the night before the scheduled shareholder vote, citing opposition from Rite Aid's individual and institutional shareholders.
For its third fiscal quarter ending on Dec. 1, 2018, Rite Aid reported $5.5 billion in revenues compared to $5.4 billion in the third quarter of the previous fiscal year.
In January 2019, Rite Aid announced that it received notice from the NYSE that it was no longer in compliance with its standard listing rules. That's because the average closing price of Rite Aid's common stock was not at least $1 per share during a consecutive 30-day trading period.