Rite Aid Enters Bidding for Eckerd
Rite Aid (RAD) - Get Report has joined the bidding for J.C. Penney's (JCP) - Get Report Eckerd division, according to a published report.
Camp Hill, Pa.-based Rite Aid has offered J.C. Penney up to $4 billion in cash and stock to purchase Eckerd, according to
Reuters
. J.C. Penney previously received two other bids for its troubled drugstore chain, according to a report in
The Wall Street Journal
.
Representatives for J.C. Penney and Rite Aid declined to comment.
Rite Aid structured its bid for Eckerd as a tax-free transaction, relying largely on its stock, according to
Reuters
. At the end of its most recent quarter in late November, Rite Aid had just $274 million in cash and cash equivalents, presumably giving it little cash on hand to use for its bid.
Rite Aid joins drugstore rivals
CVS
(CVS) - Get Report
and
Jean Coutu Group
in bidding on Eckerd, according to published reports. Those two companies' bids valued Eckerd at between $4 billion and $5 billion,
The Wall Street Journal
reported.
CVS' bid was made in conjunction with Kohlberg Kravis Roberts, a private investment firm, according to
The Wall Street Journal
. Canadian-based Jean Coutu, which operates the Brooks drugstore chain in the U.S., teamed up with Blackstone Group to submit its bid, according to the
Journal
.
J.C. Penney hired Credit Suisse First Boston last year to explore a number of options for Eckerd, including a spinoff or a sale. The company hopes to complete the process "soon," company spokesman Quinton Crenshaw said. Crenshaw declined to give a timeline for a decision or to confirm whether the company has received any bids for Eckerd.
Although the drugstore industry is growing quickly with the boom in prescription drugs and the aging of the baby boomers, Eckerd has been unable to keep pace with rivals such as CVS or industry leader
Walgreens
(WAG)
. Unlike those chains, which have posted rapid sales growth, Eckerd has posted much slower sales -- and its earnings have declined. In fact, the chain's poor results the last two quarters have
dragged down overall revenues and earnings at J.C. Penney.
J.C. Penny shares were recently down 4 cents, or 0.1%, to $28.30, while Rite Aid was off 8 cents, or 1.4%, to $5.71.