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By Jacob Rund
Rite Aid Corp. and its directors are facing an investor-driven lawsuit that could temporarily block the pharmacy chain’s pending $3.1 billion merger with Albertsons Companies Inc.
Rite Aid shareholder Mel Aklile, in a would-be class action filed April 24 in Delaware Chancery Court, accused the company’s board of “attempting to manipulate the structure” of the deal to deny stockholders their appraisal rights.
The complaint alleged that the directors breached their fiduciary duties by signing off on disclosures that failed to inform stockholders of their right to demand appraisal. The disclosures didn’t have “sufficient information to allow for a fully informed decision” about whether to challenge the deal’s value, according to the complaint.
Delaware’s appraisal statute allows stockholders of a target company to sue for more than they would have received in a buyout. But recent state court decisions ruling against shareholders on those claims have decreased the likelihood of a favorable outcome for most petitioners.
Rite Aid stockholders, under the terms of the deal reached in February, can exchange 10 of their shares for either one share of Albertsons stock and $1.83 in cash, or 1.079 shares of Albertsons stock. The merger gives Albertsons, a privately held grocery chain, control of the remaining Rite Aid stores not purchased by Walgreens Boots Alliance Inc. last year. The deal is undervalued, analysts and shareholders said. But because Albertsons is privately held, it’s also harder to assess the value of its shares.
The Federal Trade Commission cleared the deal in March.
Camp Hill, Pa.-based Rite Aid, in a document filed with the Securities and Exchange Commission, said its stockholders are not entitled to appraisal rights because cash consideration for their shares is optional, according to the lawsuit. Rite Aid shareholders “are faced with a false ‘choice’” meant solely to circumvent the Delaware appraisal statute, the complaint said.
Aklile is asking the court to enjoin the deal until appraisal rights are granted.
A Rite Aid spokesperson didn’t immediately respond to a request for comment.
The case is Aklile v. Rite Aid Corporation , Del. Ch., No. 2018-0305, complaint filed 4/24/18 .
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