Rite Aid Corporation (NYSE:RAD) has agreed today to buy a leading pharmacy benefit manager, Envision Pharmaceutical Services, in a cash-and-stock deal worth $2 billion. Also known as EnvisionRx, Envision Pharmaceutical Services is owned by the global private equity firm TPG Capital.
Shares of Rite Aid escalated 8.84% in pre-market trade today after the deal was announced, which could potentially enhance its competitive position in the rapidly changing pharmacy retail market.
Rite Aid Corporation (NYSE:RAD) announced the buyout of EnvisionRx yesterday. The pharmacy benefits manager was projected to generate revenue of $5 billion and EBITDA of $150-160 million for fiscal year 2015 (FY15). Valued at $2 billion, the transaction implies a 2015 enterprise value to EBITDA (EV/EBITDA) multiple of 12.9, or 11.1 if one includes the tax benefits expected worth $275 million.
The market is not sure of what to expect from the US drugstore chain, Rite Aid Corporation (RAD). Rite Aid stock fell 18% after the drugstore revised down its next year’s guidance for the second time in September. This was followed by major investment firms, including JPMorgan Chase & Co.
Rite Aid Corporation (RAD) has retreated roughly 19% in the last three months, underperforming competitor Walgreen Company (WAG) by about nine percentage points (ppts); the company has continued to underperform Walgreen in terms of topline growth.
By Osman Gulseven:Rite Aid Corporation (RAD) has been one of the top performing stocks of 2013. For a company that is rocked by declining sales and negative earnings, the rally seems contradictory. However, the market has a positive outlook for the company. Since the start of this year, shares of Rite Aid gained an outstanding 65%.
Rite Aid Corporation (RAD), through its subsidiaries, operates retail drugstores in the United States. The company's drugstores primarily offer pharmacy services.Rite Aid is scheduled to report its first quarter earnings results on June 21, 2012, before market open.
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By Brian Nichols:Alcatel-Lucent (ALU) and Rite Aid (RAD) have been two of the market's top performers over the last year. Moreover, both created new 52-week highs earlier this week, with Alcatel trading nearly 200% and Rite Aid over 265% above each stock's 52-week lows.
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By Chris Katje: When investing, it's usually smart to buy the market leader. This ensures that the company will be around and can hopefully fight off smaller competitors. However, in the pharmacy industry, I believe that Rite Aid (RAD) offers the best investment opportunity.