Shares of Fred’s Inc. (NASDAQ: FRED) are
skyrocketing more than 77 percent on Tuesday following the company’s
announcement that it has acquired 856 Rite Aid Corporation (NYSE: RAD) stores for $950 million in cash.
Obviously the market believes Fred’s got a good deal on the assets, and shares jumped to new 10-year highs following a brief
trading halt Tuesday morning.
The Rite Aid deal would make Fred’s the third-largest drug store chain in the U.S. behind only Walgreens Boots Alliance
Inc (NASDAQ: WBA) and CVS Health
Corp (NYSE: CVS). The asset divestiture is part of the
potential $9.4 billion merger between Walgreens and Rite Aid.
Back in October 2015, Walgreens agreed to buy Rite Aid for $9 per share. However, the market has been extremely skeptical that
regulators would allow the merger on
antitrust grounds. Now that Rite Aid has dumped nearly 900 stores, the deal seems much more likely to be approved.
Not only did Fred’s seem to get a great price on the store, Rite Aid shareholders are now one step closer to that $9/share
buyout. While Fred’s shareholders are the big winners, Walgreens shares are up 0.6 percent and Rite Aid shares are up 5.3 percent
as well.
Fred’s is now trading at around $19.50 after briefly spiking to a new 10-year high of $20.42. The last time the stock traded
above $20.40 was way back in 2004.
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