Some Notes on Rite Aid's Purchase of EnvisionRx

On Wednesday, February 11, 2015 Rite Aid agreed to the purchase of top pharmacy benefit manager, Envision Pharmaceutical Services for roughly $2 Billion in cash and stock. Below are some reactions to the transaction:

• The market has reacted favorably to Rite Aid’s purchase. The company’s stock is up about 10% today (above $8). This is a far cry from when Rite Aid’s stock was trading at $.22 per share.
• It is amazing that Rite Aid made such a large acquisition primarily from cash.
• The acquisition is predicted to add about $5 billion dollars to Rite Aid’s sales. The transactions is a strong add to top line growth and accretive to Rite Aid this year.
• Rite Aid (Rated B2 by Moody’s) is just catching up with CVS and Walgreens that have previously acquired benefits managers but it is a welcome addition.
• With regard to net lease investment sales, Rite Aid cap rates have dramatically compressed in the last two years and Rite Aid properties with longer term leases are now being offered in the low 6′s.
• On the negative side, Rite Aid is still developing a small number of new stores per year so there aren’t very many Rite Aids on the market.