(Reuters) – Drug retailer chain Rite Aid Corp and U.S. grocer Albertsons Companies Inc ABS.N agreed to terminate their merger settlement, the businesses mentioned on Wednesday, somewhat over 10 days after a shareholder advisory agency opposed the deal.
Last month, Institutional Shareholder Services Inc (ISS) had mentioned that Rite Aid traders ought to vote down its $24 billion merger with Albertsons saying the settlement was not going to present the drug retailer chain’s shareholders a “fair ownership interest” within the mixed firm.
The ISS report was seen as a blow to Albertsons and its majority proprietor, non-public fairness agency Cerberus Capital Management LP, who have been hoping that the deal will assist them win a brand new enterprise amid stress from retailer Amazon.com Inc ( AMZN.O ) and Walmart Inc ( WMT.N ).
Also against the deal is Highfields Capital Management, which is Rite Aid’s fourth-largest shareholder, proudly owning four.four % of Rite Aid’s excellent shares as of the latest filings with regulators.
Albertsons mentioned it disagreed with the view that the U.S. grocer was not providing ample merger consideration to the shareholders of Rite Aid, who have been to get 30 % of the mixed firm beneath the phrases of the settlement.
Rite Aid Chief Executive John Standley mentioned the corporate heard the views of its shareholders and would function as a standalone agency. Albertsons mentioned it was unwilling to alter the phrases of the settlement.
The U.S. grocer had hoped that the deal, which was seen as a part of a wave of consolidation within the drug retailing sector, would assist Albertsons turn into a formidable competitor to CVS Health Corp ( CVS.N ) and Walgreens Boots Alliance Inc ( WBA.O ), whereas additionally giving its non-public fairness homeowners a option to money out on their decade-long funding within the firm.
Cerberus first took a stake in Albertsons in 2006 and the retailer grew to become the dominate grocery franchise on the West Coast when Cerberus purchased Safeway in 2014.
Under the settlement settlement, neither of the businesses could be liable for any funds on account of the termination, Rite Aid mentioned in an announcement on Wednesday.
The drug retailer chain additionally mentioned it was evaluating governance modifications on the firm.
Albertsons reiterated its fiscal 2018 steering on Wednesday, together with an expectation for earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) of $2.7 billion.
Rite Aid’s shares have fallen by about 21 % because the deal was first introduced in late February.
(Reporting by Mekhla Raina in Bengaluru)