Rite Aid to Acquire Brooks, Eckerd

If Deal Approved, Drugstore Chain Will Be Largest on East Coast

Rite Aid Corporation announced today that it will acquire and rename the Brooks and Eckerd drugstore chains, further consolidating a retail pharmacy industry that once featured a half dozen familiar big name chains as well as thousands of now-vanished independent stores around the country.

Eckerd and Brooks are owned by the same company, the Jean Coutu Group of Quebec.

Eckerd has 1,521 stores nationally, including 20 in the Washington area, while there are 337 Brooks stores, mostly in New York and New England. All will be rebranded as Rite Aid.

If the deal is approved by regulatory authorities, Rite Aid, now the third-largest drugstore chain, will become the largest chain on the East Coast and move within range of the other two pharmacy giants in size.

It will own 5000 stores nationally versus CVS, which has 5,400 stores and Walgreens, which claims 5,401.

The consolidation comes amid rising pharmaceutical costs and increasing competition between traditional drugstores and a super-chain stores such as Wal-Mart and Target, as well as mail order pharmacies and super market based pharmacies.

Over the past 15 years, the big three pharmacies have collectively acquired and eliminated once-famous brands such as Revco, Dart Drugs and Washington-based Peoples, which was acquired by CVS during the 90's.

In a press release, Rite Aid said it would pay the Jean Coutu Group $1.45 billion in cash and 250 million shares of Rite Aid common stock, which closed yesterday at $4.68 per share, as well as assume $850 million in debt.

Mary Sammons will remain President and CEO of Rite Aid and become chairman of the Rite Aid Board of Directors. Michel Coutu, President of the Coutu Group's U.S. operations will be co-chairman of the board.

"The Brooks and Eckerd stores are in good locations with dedicated associates committed to serving their customers and their communities," Sammons said in a statement. "Adding these store to our company gives Rite Aid scale comparable to our major drugstore competitors," she said, "and we believe this enables us to compete more effectively in a highly competitive business."

In 2004, a federal judge sentenced the former chairman and chief executive of Rite Aid Corp. to eight years in prison for his role in accounting fraud at the drugstore chain. Martin L. Grass, 50, was ordered to pay $3.5 million in fines and forfeitures in connection with his guilty plea to two conspiracy charges.